MET MetLife Inc

Manulife Financial Corporation (MFC) reported fourth-quarter 2011 loss of 5 cents per share, compared with earnings of $1.00 per share in year-ago quarter. Net loss came in at $67.4 (C$69) million, compared with net income of $1,772 (C$1,796) million in fourth-quarter 2010.

The quarter under review included $149.5 (C$153) million related to the direct impact of equity markets and interest rates, $272.6 (C$279) million of investment related gains, net credit loss of $31.3 (C$32) million, due to higher-than-expected downgrades and net impairments in commercial mortgage-backed securities and residential mortgage-backed securities assets, $188.6 (C$193) million of charges related to dynamically hedged variable annuity business, and $94.8 (C$97) million for the expected cost of macro equity hedges.

Manulife also booked a goodwill impairment charge of $649.8 (C$665) million in the quarter under review.

For full year 2011, net income came in at 2 cents, reversing the loss of 99 cents in 2010. Full year net income was $130.5 (C$129) million compared with loss of $1,613.9 (C$1,663) million.

Manulife continued to improve its equity risk profile by hedging in-force variable annuity guarantee value. The percentage of guarantee value hedged or reinsured remained flat with the last quarter at 63%, but increased from 55% as of December 31, 2010.

During the quarter, insurance sales increased 13% year over year. Full year insurance sales increased 11% over 2010.

Wealth sales declined 12% year over year in the quarter under review. However, full year wealth sales improved 11% over 2010.

Insurance premiums and deposits in the reported quarter were $4.8 (C$4.9) billion, flat year over year as solid growth across Asia and in Canadian Affinity markets was offset by lower premiums in the Reinsurance segment subsequent to divestment of the Life Retrocession business. Full year Insurance premiums and deposits increased 7% over 2010 to $19.2 (C$19) billion on the back of solid growth in Asia, Canadian Affinity and John Hancock Life in the U.S.

Wealth businesses, premiums and deposits were $8.9 (C$9.1) billion in the fourth quarter, down 7% on a constant currency basis from the prior-year quarter. Weak sales of North American mutual fund attributable to volatile market conditions and lower fixed product sales attributable to low interest rate more than offset the strong growth at The Institutional Advisory business, Group Retirement Solutions in Canada and foreign denominated annuities in Japan.

Full year wealth businesses, premiums and deposits improved 10% over 2010 to $40.5 (C$40) billion on the back of solid North American mutual fund sales and growth in Asia, partially offset by lower fixed product sales.

Total funds under management as of December 31, 2011, were $490.2 (C$500) billion, showing an increase of $23.5 (C$23) billion over December 31, 2010. The year-over-year increase was driven by investment returns, positive policyholder cash flows and a weak Canadian dollar, partially mitigated by higher expenses, commissions and taxes and other movements.

The Manufacturers Life Insurance Company’s consolidated regulatory capital ratio, Minimum Continuing Capital and Surplus Requirements was 216% as of December 31, 2011, reflecting a decline from 219% as of September 30, 2011.

Zacks Rank

We retain our Neutral recommendation on Manulife Financial. The quantitative Zacks #3 Rank (short-term Hold rating) for the company indicates no clear directional pressure on the stock over the near term.

Headquartered in Toronto, Canada, Manulife Financial operates as a life insurance company. The company also offers reinsurance services. The company functions as Manulife Financial in Canada and Asia and primarily as John Hancock in the United States. The company competes with MetLife Inc. (MET).

 
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