Manulife sees insurance sales drop 23 per cent in Q1 on lower net profit

Manulife Financial Corp. said Thursday its first-quarter profits were almost halved compared with a year ago as insurance sales fell 23 per cent with Canada and Japan as weak performers.

Insurance sales dropped to $619 million in the quarter from $799 million, hit by tax and product changes in Japan and price increases to protect margins and lower sales of group benefits to large clients in Canada, chief executive Donald Guloien said Thursday.

“While we are very pleased with our performance in our wealth management and asset businesses this quarter, we were disappointed with a decline in insurance sales,” Guloien told financial analysts on a conference call.

Guloien said prices increases in Canada could have a short-term negative effect on the company, which is the country’s largest life insurer.

“These pricing actions have not yet been instituted by our competitors. We expect to give up some market share initially.”

In its financial results, Manulife (TSX:MFC) earned $540 million or 28 cents per share in the first quarter, down sharply from the almost $1.23 billion or 57 cents per share it reported in the same period a year ago.

However, core earnings, which exclude things like goodwill, pension gains and non-recurring items, rose to $619 million from $526 million in the year-earlier period.

Net premium income increased to nearly $4.6 billion, up from $4.5 billion a year ago.

Wealth sales increased by 43 per cent to C$12.4 billion, up from $8.7 billion in the same quarter last year and includes mutual fund and group pension sales.

“While insurance sales fell short of our expectations, we generated record wealth sales with contributions form all of our major business units around the world producing all-time record funds under management,” Guloien said.

RBC Capital markets analyst Andre-Philippe Hardy said Manulife’s results overall were slightly ahead of his estimates.

But he said that earnings per share of 28 cents came in below his estimate of 35 cents.

Hardy noted that Manulife’s sales results were mixed.

“Insurance products were down 23 per cent as a result of product and pricing strategies in Asia and Canada, and lower group benefits sales in Canada, while wealth management sales were up 43 per cent, driven by Asia and the U.S.,” Hardy said in a research note.

Total funds under management increased to $555 billion as of March 31, compared with $511 billion as of March 31, 2012.

Total contract benefits and expenses jumped to $5.57 billion, up from $2.3 billion.

Shares in Manulife closed up 3.9 per cent, or 57 cents, at $15.33 Thursday on the Toronto Stock Exchange.