Volatile equity markets and weak interest rates battered Manulife Financial’s Q2 2012 earnings, forcing it to report its fifth loss in the past ten quarters.
Following news that low rates could cost insurers millions in the next few years, the company released its earnings. Overall, Manulife posted a $300-million loss in its second quarter, saying it expects to book additional charges of $400 million in 2013 if interest rates remain at current levels.
The company, along with other large insurers, will now turn to Asia, as well as growing their asset management businesses, in hopes of repositioning themselves in the low-interest rate economy.
It booked a $727-million charge relating to the direct impact of equity markets and rates, and says it will focus on growing its less-guarantee-dependent wealth management business.
“While the volatility of equity markets and lower interest rates took their toll, we made substantive progress against our strategic priorities,” CEO Don Guloien told analysts during a conference call.
During the quarter, Manulife began its partnership with Bank Danamon in Indonesia and also started up operations in Cambodia.
The company’s multi-million Q2 loss equaled 18 cents per share, compared to a profit of $490 million or 26 cents per share in Q2 2011.
Overall revenue from insurance premiums, investments and other sources increased to $11.3 billion, up from $10.8 billion a year earlier.
Excluding the impact of weak markets, Manulife says it would have had a profit of $427 million.
Yesterday, shares in Manulife were up six cents to $10.89, while Sun Life shares dropped 17 cents to $21.60.
As the Globe and Mail reports, due to lower earnings and economic headwinds, Manulife will be forced to rethink its future plans and strategies.
Since taking a hit during a recession, its been trying to rebuild and had set a goal of earning $4-billion a year by 2015. Guloien admits he will likely have to change this target.
“Since we set those targets in 2010 the macro-economic headwinds have become greater and we can’t overcome them, but the progress that we’re making is enormous,” he told the Globe.