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Manulife Financial Corporation reports Q1 loss

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Manulife Financial Corporation (MFC) has reported a shareholders’ net loss of USD1,068 million for the first quarter ended March 31, 2009, compared

Manulife Financial Corporation (MFC) has reported a shareholders’ net loss of USD1,068 million for the first quarter ended March 31, 2009, compared to net income of USD869 million in the first quarter of 2008.

Fully diluted loss per share was USD0.67 compared to earnings per share of USD0.57 in 2008. The Manufacturers Life Insurance Company (MLI) reported an MCCSR ratio of 228 per cent as at March 31, 2009, up from 198 per cent last year.

“This was obviously a difficult quarter, reflecting the impact of the global economy on equity markets, other asset values and sales,” says Donald A Guloien, Manulife’s incoming President and Chief Executive Officer. “Our global franchises remain strong, our capital position is near the high end of its historical range, and we enjoy high credit ratings.

“In the past six months, Manulife has proven it can successfully access the capital markets through common equity and preferred share issuance, bank loans and public debt,” he adds. “We have earned the right to these alternatives as a result of our enviable financial condition and strong ratings. But as we look forward, knowing that there is risk of further turmoil in capital markets, our focus is going to be on balancing our business mix, reducing risk, and strengthening our capital levels.”

The quarter’s net loss was primarily driven by continued declines across all equity markets, particularly in the US Reserve strengthening for segregated fund guarantees resulted in an accounting charge of USD1,146 million and credit impairments were USD121 million. Also affecting earnings this quarter were fair value adjustments of USD277 million primarily for declines in commercial real estate values, USD255 million of equity related charges and USD72 million related to credit downgrades. Earnings for the quarter, excluding these items, totaled $803 million and cash provided by operating activities of USD2.5 billion reflected the non-cash nature of these charges.

“Actuarial practices require us to value our assets and liabilities at the quarter end mark, despite the very long-term nature of these holdings and obligations. Given the current environment, this creates significant volatility in our reported results which detracts from our strong core business results,” says Peter Rubenovitch, Senior Executive Vice President and Chief Financial Officer. “Despite these non-cash charges, our investment portfolio remains well positioned for this challenging credit cycle and our capital levels remain above our targeted levels.”

In light of continued equity market volatility and sensitivity, the Company conducted a strategic review of its segregated fund product portfolio and started implementing changes to its product offerings in the quarter. In the US, fees were increased, deferral bonuses were reduced, additional features were withdrawn, and equity exposure was reduced in several key funds. In Canada, the hedging program for new segregated fund business was successfully implemented at the end of March, and USD1.5 billion of in-force business was hedged. New business in North America is now hedged on an ongoing basis.

“Going forward, the Company will focus on rebalancing its product portfolio to diversify its sources of income and its risk positions,” says John DesPrez, newly appointed Chief Operating Officer. ‘One of my first initiatives in my new capacity will be an analysis of growth opportunities for our Company.”

Premiums and deposits were USD19.3 billion in the quarter, a decrease of 16 per cent on a constant currency basis. Increased premiums arising from higher sales of fixed wealth products and in-force insurance business growth were more than offset by the decline in variable wealth product deposits in light of continued market volatility.

Total funds under management as at March 31, 2009 were USD405.3 billion, an increase of one per cent over the prior year. The increases from currency movements of USD57.4 billion and net policyholder cash flows of USD21.8 billion were offset by market value declines.

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