Manulife profit misses estimates on energy investments

By John Tilak

TORONTO (Reuters) - Canadian insurer Manulife Financial Corp (Toronto:MFC.TO - News) reported fourth-quarter earnings that missed market estimates on Thursday, hit by the impact of weak oil prices on its investments.

Oil prices have continued to plunge since the selloff began in 2014, and energy-sector investments have hurt the company's bottom line in three of the last four quarters.

Manulife, Canada's largest insurer, said it would be difficult to achieve its core earnings target of C$4 billion in 2016, citing "macroeconomic headwinds and energy price volatility."

The Toronto-based company recorded a charge of $361 million in the quarter, largely tied to its oil and gas investments.

Given the weakness in commodity prices this year, Manulife would probably take a charge in the first quarter as well, Chief Financial Officer Steve Roder said.

However, the company is not looking to reduce its exposure to the energy market and not likely to make any major changes to its oil and gas portfolio, he told Reuters in an interview.

"We think this could be a really good asset class for us over the next 10 years or so."

Oil and gas forms less than 1 percent of the company’s total asset portfolio.

Analysts and investors are concerned about how a prolonged oil price slump could weigh on results. Shares of Manulife, which increased its dividend, slipped 4.3 percent in morning trade.

"I don't think at this point it's a ratings issue. It certainly creates headwinds for the growth that they're seeing in the core part of their business," said Dafina Dunmore, director, insurance at Fitch Ratings.

"The oil and gas exposure remains the biggest headline for this company," she added, noting that any rebound in the oil price would alleviate some of the pressure.

Overall net income for the quarter ended Dec. 31 was C$246 million, or 11 Canadian cents a share, compared with C$640 million, or 33 Canadian cents a share, a year ago. Core earnings rose to 42 Canadian cents share.

Analysts on average had expected earnings of 45 Canadian cents a share, according to Thomson Reuters I/B/E/S.

Assets under management and administration rose 35 percent to C$935 billion by the end of 2015, helped partly by acquisitions.

Sales at its insurance division grew 22 percent, driven by growth in Asia and Canada. Competitive challenges saw a decline in its U.S. insurance business.

Manulife posted record insurance sales in almost all its Asian markets, Roder said.

(Reporting by John Tilak; Editing by Angus MacSwan and W Simon)