Toronto–(PHStocks)–Manulife Financial Corp. (PSE: MFC) has reported a net loss attributed to shareholders of $69 million for the fourth quarter ended December 31, 2011, and net income of $129 million for the full year. The Company took a goodwill impairment charge of $665 million in the fourth quarter which was related to low interest rates and actions taken to reduce the impact of low interest rates in 2011. The Company has also restructured its U.S. annuity businesses, and implemented further price increases on new business.
As a result of these actions, and others taken by the Company over the last three years, the Company has achieved its product mix repositioning. Products “not targeted for growth” now represent a small part of the portfolio, and as a result, use of this nomenclature will be discontinued in future quarters. The Company continues to aggressively pursue growth of wealth management products, insurance products and fee-based products, with less-intensive interest rate and equity guarantees in all of its geographies.
Throughout 2011, the Company continued to make progress hedging both equity markets and interest rates, and the benefits of the program were evident during the second half of the year when the hedging was successful in mitigating most of the impact. The Company also made progress with John Hancock Long-Term Care price increases on in-force retail business, with four additional state approvals received in the fourth quarter, bringing the total to 29 states. Through its strong distribution and branding efforts, the Company generated significant and diversified growth of less risky higher return new business. Manulife completed the year ended December 31, 2011 with a MLI MCCSR ratio at a comfortable 216%.
- Company-wide sales of insurance products targeted for growth in the fourth quarter increased 13 percent over the fourth quarter 2010, excluding the impact of New Whole Life (NWL) in Japan, where deliberate price increases were implemented earlier in the year. Including NWL, sales increased by one percent. For the full year, sales of insurance products targeted for growth increased 11 percent versus 2010 and were up 35 percent from 2009.
- Company-wide sales of wealth products targeted for growth in the fourth quarter remained strong despite volatile equity markets and historically low interest rates. Although fourth quarter 2011 sales of wealth products targeted for growth decreased by 12 percent versus the fourth quarter 2010, for the full year, sales of these products increased 11 percent compared to 2010 and were up 40 percent from 2009.
- In Asia, the Company continued to expand distribution. In the fourth quarter, the Company completed a new bancassurance strategic partnership with PT Bank Danamon Indonesia Tbk, bringing it to a total of six new bancassurance arrangements in 2011. As of December 31, 2011, the Company increased its number of agents by 18 percent compared to the prior year, with record numbers of agents in Hong Kong, Vietnam, China, Indonesia, and the Philippines. Major branding campaigns were launched throughout the region in 2011 to strengthen brand awareness.
- In Canada, fourth quarter sales growth of targeted insurance and wealth products was moderated by the impact of economic uncertainty and price increases. Group Benefits and Affinity Markets recorded strong fourth quarter sales growth, while Manulife Mutual Funds delivered record sales for the full year of $2 billion, a 45 percent increase over 2010, and Manulife Bank delivered record lending volumes.
- In the U.S., sales of life insurance products targeted for growth in the fourth quarter increased 13 percent versus the fourth quarter 2010, driven by sales of new universal life products launched in early 2011. For the full year, John Hancock Mutual Funds delivered record sales of $12.5 billion, 29 percent above 2010.
- In order to reposition the Company’s U.S. retail annuity businesses in light of the unfavourable markets, the Company combined its retail annuity distribution resources with those of John Hancock Mutual Funds.
- As a result of the current and anticipated low interest rate environment and actions in 2011 taken to reduce the impact associated with low interest rates, the carrying value of goodwill for the Company’s John Hancock Life Insurance business was reduced by $665 million.
- Net income in accordance with U.S. GAAP for the fourth quarter was $370 million, $425 million higher than the Company’s results under the Canadian version of IFRS (C-IFRS 3 ). For the full year 2011, U.S. GAAP net income was $3.8 billion, $3.5 billion higher than its results under the C-IFRS. Shareholders’ equity in accordance with U.S. GAAP was $40.8 billion at the end of 2011, $16 billion higher than under C-IFRS.
- General account asset performance continued to be a Company strength, with the small amount of credit losses in the fourth quarter more than offset by gains in real estate, which reflects its strategy of avoiding risk concentration with a diversified, high-quality portfolio.
- Achieved a record $500 billion in Funds Under Management as at December 31, 2011.
- The Company remained ahead of its timetable on hedging. It has already achieved its year-end 2012 equity markets hedging goal and 93 percent of its 2014 goal. The Company has also achieved its 2014 interest rate hedging goal.
- The MCCSR ratio for The Manufacturers Life Insurance Company (MLI) stood at 216 percent as of December 31, 2011.
- Because sales of products not targeted for growth now represents a relatively small portion of overall sales, the categorization of products as “targeted for growth” and “not targeted for growth” will be discontinued in 2012.
Fourth Quarter 2011 (Three months ended December 31, 2011):
- Net loss attributed to shareholders of $69 million vs. a net gain of $1,796 million in the fourth quarter of 2010.
- Diluted loss per share, excluding convertible instruments, of $0.05 vs. earnings per share of $1.00 in the fourth quarter of 2010.
- Return on common shareholders’ equity of (1.6) percent.
- Net loss excluding the direct impact of equity markets and interest rates was $222 million vs. a net gain of $972 million in the fourth quarter of 2010.
- Net income in accordance with U.S. GAAP for the fourth quarter was $370 million vs. $863 million in the fourth quarter of 2010.
Full Year 2011 (12 months ended December 31, 2011):
- Net income attributed to shareholders of $129 million vs. a net loss of $1,663 million for the full year 2010.
- Diluted earnings per share, excluding convertible instruments, of $0.02 vs. a loss per share of $0.99 for the full year 2010.
- Return on common shareholders’ equity of 0.2 percent.
- Net income excluding the direct impact of equity markets and interest rates was $1,193 million vs. a net loss of $660 million for the full year 2010.
- Net income in accordance with U.S. GAAP for 2011 was $3,765 million vs. $1,712 million for the full year 2010.
President and Chief Executive Officer Donald Guloien stated, “With the end of 2011, we achieved our three-year product mix repositioning in all three of our geographies. We have led the market in executing price increases on new products, and made progress on price increases for our in-force Long-Term Care business. We also significantly expanded our equity market and interest rate hedging programs in the first half of the year, reducing our earnings and capital sensitivity. These programs mitigated most of the equity market and interest rate risk in the second half of the year as financial markets became increasingly volatile.”
He added, “At the same time, we delivered strong top line growth in our highest priority areas, particularly in the non-guarantee-dependent wealth and asset management businesses and in Asia. We expanded our distribution capabilities in Asia, including growing our bancassurance partnerships in six of our businesses. In Canada, we delivered record sales results for both mutual funds and the bank and in the U.S., John Hancock Mutual Funds sales also reached a record level. At the same time, we strengthened the Manulife and John Hancock brands. Thanks to these efforts and continuing positive results from investments, we are well positioned to pursue more sustainable, better diversified growth.”
Chief Financial Officer Michael Bell commented, “We closed 2011 in a strong financial position, with a capital ratio for MLI at a comfortable 216 percent, given our equity market and interest rate sensitivity and with a healthier mix of new business. We continue to remain ahead of our timetable on hedging. We have already achieved our year-end 2012 equity markets hedging goal and 93% of our 2014 goal. We have also achieved our 2014 interest rate hedging goal. Our Investment division continued to generate strong general account performance, reflecting our strategy of avoiding risk concentration with a diversified, high-quality portfolio and disciplined approach to extending credit. With this progress we are well positioned to pursue sustainable growth with our focus on selling products that we expect to generate higher returns with lower earnings volatility.”
For more information, please visit www.manulife.com.