Energy price volatility casts a shadow over Manulife’s profit prospects after disappointing 2015

Quarterly dividend lifted by 9pc to 18.5 Canadian cents a share

PUBLISHED : Thursday, 11 February, 2016, 9:23pm
UPDATED : Friday, 12 February, 2016, 4:10pm

Canadian insurer and fund manager Manulife Financial says it will be tough to achieve its core earnings target for this year unless energy prices strengthen, after posting a 61.6 per cent year-on-year drop in fourth-quarter profit due to sharply lower oil and gas prices.

Net profit for the three months to December 31 amounted to C$246 million (HK$1.37 billion). For the whole of last year, net profit fell 37.4 per cent to C$2.19 billion from C$3.5 billion in 2014.

Calling the net profit disappointing due to the “mark-to-market” impact of lower energy prices, Donald Guloien, chief executive of the Toronto, New York, Manila and Hong Kong-listed firm, said core profit would have risen a better-than-planned 28 per cent to C$3.43 billion for the full year, when C$200 million of non-recurring investment gains booked in 2014 were excluded. When the gains were included, core profit rose 18.7 per cent.

“Looking ahead, we expect that some macroeconomic headwinds and energy price volatility will persist, and that unless energy prices strengthen, it will be difficult for us to achieve the C$4 billion core earnings objective we have set for 2016,” he said.

Manulife said it remained confident of its “underlying fundamentals” and “long-term strategic positioning” and had therefore raised its quarterly dividend by 9 per cent to 18.5 Canadian cents per share, its third increase in less than two years. It said it recorded a 28 per cent rise in insurance sales in Asia last year, and a 56 per cent increase in gross asset management business.

Consultancy AT Associates director Alan Taylor said Manulife had been increasing its market share of the mandatory provident fund (MPF) business in Hong Kong over the past few years.

“The insurance companies have been doing well on the whole relative to the banks, and other types of providers, and Manulife is one of those which have been gaining,” he said.