Manulife Financial earnings close in on $4 billion mark

By Hubert Roy | June 27 2007 08:35PM

For the 13th consecutive year, Manulife Financial has posted record net earnings, at $3.985 billion, up from $3.294 billion in 2005.

The return on shareholders’ equity was 16.8% in 2006, versus 14.1% in 2005.

In the company’s public documents, Manulife explains the enviable 2006 results by strong returns on investments, vigorous stock markets and tax benefits. These factors propelled 25% growth in new sales for all sectors combined, Manulife reports. The fourth quarter was particularly robust for Manulife. For the first time, the insurer racked up $1 billion in net earnings in a single quarter.

Funds under management also hit record levels, at $414 billion, up 11% from 2005.

The international clout of Manulife is indisputable. Net earnings from Canadian operations represented only a quarter of the insurer’s total net earnings in 2006, similar to 2005. The Canadian division attained net earnings of $918 million in 2006, compared with $809 million in 2005.

By comparison, the insurance and wealth management activities in the U.S. represented nearly half of Manulife’s total net earnings in 2006, at 44%, unchanged from 2005. This division increased its net earnings by 19% between 2005 and 2006, for a total of $1.758 billion.

Manulife’s Asia and Japan divisions generated 18% of the insurer’s total net earnings in 2006, at $734 million. Earnings remained stable, remaining close to their 2005 level of $732 million.

Manulife currently has more than 25,000 agents in Asia, and has signed distribution agreements with over 50 banks and securities brokers.

Concerning its Canadian operations, the insurer trumpeted its solid growth of business in force, improved profit margins on new business and efficient expense cutting measures.

Wealth management also prospered in 2006, as segregated funds ballooned by 36%, buoyed by the variable annuity product IncomePlus, launched in late 2006.

Of note, mutual fund deposits were hobbled by the weak competitiveness of the fund portfolio.

In addition, the deterioration of technical results in group insurance eroded net earnings from Canadian operations.