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Manulife earnings hit hard by sharp drop in energy prices

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Manulife Financial Corporation suffered significant declines in fourth-quarter and full-year earnings in 2015, the company disclosed today.

The Canada-based life insurer, which operates in the U.S. through its John Hancock unit, recorded fourth quarter net income attributable to shareholders of CA$246 million (US$176.2 million). This compares to CA$640 million (US$458 million) for the year-ago period, which constitutes a 62 percent dip. For all of 2015, earnings came to CA$2.2 billion (US$1.6 billion), down from CA$3.5 billion (US$2.5 billion) in 2014, a 59 percent decline.

In the fourth quarter of 2015, fully diluted earnings per common share (EPS) was CA$0.11 (US$0.79) and return on common shareholders’ equity (ROE) was 2.3 percent. These results compare with CA$0.33 (US$0.24) and 8.1 percent, respectively, for the fourth quarter of 2014 (“4Q14″).

For the full year of 2015, fully diluted EPS was CA $1.05 (US$0.75) and ROE was 5.8 percent. The 2014 results were CA$1.8 (US$1.9) and 11.9 percent.

In a press statement, Manulife attributes the deterioration in earnings for the quarter and full year to the “sharp decline in oil and gas prices,” which significantly impacted the company’s investment performance. Manulife reported fourth quarter and full-year charges of CA$250 million and CA$876 million, respectively. 

Core earnings (comprising items that reflect the underlying earnings capacity of Manulife’s business) in 4Q15 was CA$859 million (US$615 million). This compares with CA$713 million (US$510.7 million) in 4Q14. For all of 2015, core earnings totaled CA$3.4 billion (US$2.4 billion) compared with CA$2.9 billion (US$2.1 billion) in 2014.

“This was a disappointing year in terms of net income, largely due to sharp mark-to-market declines in oil and gas prices, diminishing an otherwise great year,” said Manulife President and CEO Donald Guloien in a press statement. “Our core earnings, before giving effect to investment-related impacts, rose 28 percent, which was ahead of plan, and highlights Manulife’s powerful operating momentum. We delivered strong top-line growth both in the fourth quarter and for the full year, with most of it coming from businesses which generate our highest returns.”

“Looking ahead, we expect that some macroeconomic headwinds and energy price volatility will persist, and that unless energy prices strengthen, it will be difficult for us to achieve the [CA]$4 billion core earnings objective we have set for 2016,” he added. “Despite these challenges, we have never felt more confident about the underlying fundamentals and the long-term strategic positioning of our company.”

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