Manulife to Post Fourth-Quarter Loss, Sell Stock (Update4)
By Sean B. Pasternak
December 2, 2008
Dec. 2 (Bloomberg) -- Manulife Financial Corp., Canada's largest insurer, expects to report its first quarterly loss since going public in 1999 and will sell as much as C$2.13 billion ($1.7 billion) in new stock to shore up capital.
Manulife forecast a fourth-quarter loss of about C$1.5 billion, the Toronto-based insurer said today in a statement sent by Marketwire. The company was expected to have profit before one-time items of C$696 million in the quarter, according to the average estimate of six analysts surveyed by Bloomberg News. Net income for the year will be about C$900 million, Manulife said.
Manulife, which owns Boston-based John Hancock Financial, is raising capital after declining stock prices worldwide eroded assets that back client annuities. The company said it will have to increase reserves for variable annuities by about C$2.7 billion in the fourth quarter if equity prices don't recover.
"We are disappointed with this poor performance," Chief Executive Officer Dominic D'Alessandro said in the statement.
The company will sell stock to boost regulatory capital, including C$1.13 billion in a private placement to eight unidentified institutional investors, and C$1 billion to a group of banks in a public offering led by Scotia Capital. The shares are being offered at C$19.40 each, 5.1 percent below yesterday's closing price of C$20.46 on the Toronto Stock Exchange.
Manulife and insurers worldwide including MetLife Inc. and Prudential Financial Inc. have raised $90.1 billion in funds since the third quarter of 2007 to counter $143.5 billion in writedowns and credit losses, according to Bloomberg data.
"Because we're in times of unprecedented volatility for financial services companies, you raise capital when you can," said Ian Nakamoto, director of research at MacDougall MacDougall & MacTier Inc. in Toronto, which manages about C$3.5 billion, including Manulife shares. "It's better to get capital when you can than when you have to."
Manulife fell C$1.04, or 5.1 percent, to C$19.42 in 10:24 a.m. trading on the Toronto Stock Exchange. The shares have plunged 52 percent this year, compared with a 38 percent drop for 43-member S&P/TSX Financials Index.
Manulife, which last month received C$3 billion in loans from six Canadian banks, reduced that credit to C$2 billion, the company said today.
The increase in capital will "will allow us to take advantage of acquisition opportunities that are emerging out of the current industry environment," D'Alessandro said.
Manulife is scheduled to report fourth-quarter results Feb. 12, according to its Web site.
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