Bloomberg News

Manulife Financial Falls as Fitch Cuts Outlook: Toronto Mover

February 14, 2012

Feb. 14 (Bloomberg) -- Manulife Financial Corp., Canada’s largest insurer, fell the most in almost three weeks after Fitch Ratings lowered the firm’s outlook to “negative.”

Manulife declined 2.3 percent to C$11.71 ($11.72) at 12:42 p.m. in Toronto Stock Exchange trading and earlier dropped as low as C$11.62, the biggest slide since Jan. 26.

“Negative trends in adjusted earnings and the company’s financial leverage” prompted Fitch to lower Manulife’s outlook from “stable,” the ratings firm said today in a statement. Toronto-based Manulife reported a second straight quarterly loss last week, taking a C$665 million charge, as low interest rates eroded investment returns.

Falling rates reduce investment income while increasing costs from obligations to clients who bought guaranteed investment products.

Peter Routledge, an analyst at National Bank Financial, downgraded Manulife shares to “sector perform” from “outperform” after the insurer announced quarterly results on Feb. 9. Ohad Lederer at Veritas Investment Research cut the stock to “sell” from “buy.”

Fitch said adjusted earnings of less than C$2.5 billion this year could trigger a ratings downgrade. Manulife may post adjusted profit of C$2.33 billion in 2012, according to the average estimate of 10 analysts surveyed by Bloomberg.

Separately, Manulife announced today it will sell 10 million in preferred stock at C$25 a share for gross proceeds of C$250 million. The offering will be led by Scotia Capital, RBC Capital Markets and TD Securities.

--Editors: Peter Eichenbaum, Steve Dickson

To contact the reporter on this story: Sean B. Pasternak in Toronto at spasternak@bloomberg.net.

To contact the editors responsible for this story: David Scanlan at dscanlan@bloomberg.net; Dan Kraut at dkraut2@bloomberg.net.


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