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Quarterly Results
Manulife Financial Corporation reports first quarter results with continuing strong sales performance
TORONTO - Manulife Financial Corporation reported shareholders' net income of $869 million and fully diluted earnings per share of $0.57, compared to net income of $986 million and fully diluted earnings per share of $0.63 in the prior year. The sharp declines in global equity markets, particularly in the U.S. and Asia, reduced reported earnings in the quarter by $265 million or $0.18 cents per share. Return on common shareholders' equity(1) was 15.1 per cent in the first quarter of 2008, compared to 16.1 per cent in 2007.
"Except for the decline in equity markets, our quarter was highly
satisfactory", said Dominic D'Alessandro, President and Chief Executive
Officer. "Strong sales levels, particularly in our insurance segments,
contributed to an impressive increase in new business embedded value. This
reflects positively on the current performance of our insurance and wealth
management businesses, and positions us well for future earnings growth."
Premiums and deposits amounted to $17.8 billion in the first quarter of
2008. On a constant currency basis, and excluding the large case premium
booked in 2007, premiums and deposits grew 12 per cent over the first quarter
of 2007, driven by robust sales and growth in recurring premiums and deposits.
New Business Embedded Value in the first quarter of 2008 was
$590 million, up 35 per cent compared to a year ago, with both our insurance
and variable annuity businesses contributing to this strong result.
"Worldwide equity markets were the most severe in 21 quarters with
significant declines in the U.S., Asia and Japan," said Peter Rubenovitch,
Senior Executive Vice President and Chief Financial Officer. "Actuarial
practices require us to assume that these declines are permanent and,
accordingly, an after-tax charge of $265 million was recorded in the quarter.
I would note that this is a non-cash charge which, in the absence of further
market declines, will not recur in future quarters."
Total funds under management as at March 31, 2008 were $400.1 billion, an
increase of two per cent over last year on a constant currency basis. Growth
in funds under management was also affected by exceptionally poor equity
markets in the first quarter of 2008, where U.S. markets declined 10 per cent
and Asian markets were down 18 per cent.
<<
(1) Return on common shareholders' equity is calculated excluding
Accumulated Other Comprehensive Income on available-for-sale
securities and cash flow hedges.
OPERATING HIGHLIGHTS
United States
- John Hancock Life ranked No.1 in U.S. individual insurance sales in
2007(2), for the second consecutive year. With a comprehensive and
competitive product offering, all major distribution channels and
product categories continued to experience significant sales growth
in the first quarter of 2008, exceeding the prior year by 42 per cent
and setting another first quarter sales record.
- John Hancock Variable Annuities sales in the first quarter of 2008
exceeded prior year levels by 18 per cent. Enhancements to the Income
Plus for Life rider made early in the year were well received by the
marketplace. The distribution partnership with Edward Jones also took
effect mid-quarter, with very favourable early sales results.
- John Hancock Retirement Plan Services remained the No.1 seller of
plans in the less than 500 lives segment in 2007(2). In the first
quarter of 2008, new case sales were the second highest on record,
and recurring contributions were seven per cent higher than in the
first quarter of 2007.
- John Hancock Long Term Care ("LTC") ranked No.1 in sales in 2007(2),
with continued product innovation and distribution expansion
initiatives contributing to strong sales momentum. Leading Edge - an
innovative product featuring built-in, compound inflation protection,
continues to build momentum, accounting for an increasing portion of
overall sales.
- John Hancock Mutual Funds achieved record first quarter sales in
open-end funds and reported a significant increase in net sales over
the fourth quarter of 2007. The sales increase was driven by a more
diverse lineup of mutual fund offerings including Lifestyle asset
allocation funds and Morningstar 4/5 star rated funds in the U.S.
large cap equity, global equity and small cap categories. Two new
funds - Optimized Value and Floating Rate Income Funds - were also
launched in the quarter.
- In a separate news release, John Hancock Mutual Funds announced the
approval of a plan to refinance and redeem all outstanding preferred
shares of five closed-end funds. A third party bank credit facility
will be used to redeem and replace 100 per cent of the outstanding
Auction Rate Preferred Securities (ARPS) of five taxable equity
funds, and to change the form of leverage from ARPS to debt. John
Hancock Funds is evaluating alternatives to complete the refinancing
of the remaining two leveraged closed-end funds.
Canada
- Individual Insurance maintained its No.2 ranking in Canadian life
insurance sales achieving record levels in 2007(2). The sales success
continued in 2008 with a new record for first quarter sales, up
30 per cent from 2007 levels. All distribution channels and major
product lines surpassed prior year, reflecting sustained improvements
in service and continued product innovation, including the launch of
a new non-participating whole life product, Performax Gold.
- Individual Wealth Management (IWM) ranked No.1 in segregated fund
sales in 2007(2), reflecting the success of IncomePlus, our
guaranteed minimum withdrawal benefit product introduced in 2006.
Momentum continued in the first quarter of 2008, with segregated
fund sales surpassing $1 billion.
- Manulife Bank continued its strong sales momentum with first quarter
loan volumes exceeding $900 million, up 21 per cent from a year ago
driven by sales of our home-secured line of credit, Manulife One.
- Group Benefits regained its No.1 ranking in sales in 2007, while
Group Savings & Retirement Solutions improved its sales ranking to
No.2 from No.3 in 2007(2). Both businesses enjoyed record setting
sales volumes with several large cases won in the year. While
relative sales levels were down in the first quarter of 2008,
proposal activity increased towards the end of the quarter and a
number of large cases in progress are expected to close later in the
year.
Asia and Japan
- Operations in Asia continued to experience exceptionally strong
sales, with first quarter Insurance sales up 46 per cent and Wealth
sales up 55 per cent over the first quarter of 2007.
- Japan variable annuity sales in the first quarter of 2008 doubled
over prior year levels, as the new generation product continued to
benefit from expanded distribution through regional banks and
securities firms.
- Hong Kong insurance sales in the first quarter of 2008 were up
11 per cent over the prior year, while pension sales were 34 per cent
higher than the first quarter of 2007. The launch of two new critical
illness products this quarter contributed to the growth in life sales
while pension results benefited from the continued strength of
Preserved Account sales.
- Other Asia Territories continued to post strong sales levels in the
first quarter of 2008 in both insurance and wealth management
segments, which were up 22 per cent and 33 per cent over prior year
levels, respectively. Continued expansion of agency forces as well as
new product introductions contributed to sales growth across almost
all territories.
- Manulife Financial continued to expand its operations in China and in
the first quarter received two additional licenses; bringing the
total number of licenses up to 30, among the most of any foreign life
insurance company in China.
Corporate
- At the Annual Meeting of Shareholders today, Mr. D'Alessandro will
announce that he will step down as President and CEO of Manulife
Financial at the next annual meeting in May, 2009. Arthur Sawchuk,
Chairman, said, "The Board was aware of the possibility that Dominic
could elect to retire at the end of this year and so it has, for the
past few years, been very focused on the critical issue of CEO
succession. We expect to announce the CEO-Designate by the end of
this year."
- Manulife Financial repurchased 4.8 million shares in the first
quarter, at a total cost of approximately $180 million.
- In a separate news release, the Company also announced today that the
Board of Directors approved a quarterly shareholders' dividend of
$0.24 per share on the common shares of the Company, payable on or
after June 19, 2008 to shareholders of record at the close of
business on May 21, 2008.
Awards
- In Asia, Manulife-Sinochem was named the "Most Trustworthy Insurance
Company" by Hexun, a well known financial website in China. The award
was based on votes received from the general public, and recognized
excellence in product design, sales and service, and professional
standards and integrity.
- In Canada, Manulife Mutual Funds received a Lipper Fund Award for the
Monthly High Income Fund, in recognition of the fund's consistently
strong, risk-adjusted performance relative to its peers over a
10-year period. Manulife Mutual Funds was also recognized by
Environics Research Group for best client services among its
competitors, according to an ongoing study.
- In the U.S., John Hancock Signature Services (JHSS), the transfer and
shareholder services agent for John Hancock Mutual Funds, was awarded
"Best-In-Class" honors and "5-Star" performer status for telephone
customer service for all of 2007 by National Quality Review (NQR).
This distinction recognizes excellence in customer service, including
telephone service, transaction processing, shareholder correspondence
and literature fulfillment.
(2) Based on LIMRA International's 2006 and 2007 full year sales survey
results for respective categories. Sales based on annualized new
premiums.
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