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Winnipeg Free Press - PRINT EDITION
Insurance companies turn to Asia
AARON VINCENT ELKAIM / THE CANADIAN PRESS ARCHIVES Manulife CEO Donald Guloien says the company is reducing its outlook because of slumping equity markets. (CP)
TORONTO -- Some of Canada's biggest insurance companies are turning their focus to Asia and the lucrative wealth-management business as they work to offset losses in their traditional markets due to persistently low interest rates.
Manulife Financial Corp. and rival Sun Life Financial reported second-quarter earnings that were battered by the impact of volatile equity markets and weak interest rates on their investments.
Each forecast low interest rates could cost them hundreds of millions of dollars in the next few years if rates stay where they are.
And each noted it would focus on expanding its footprint in Asia and growing asset-management businesses in attempts to reposition themselves in the low-interest rate economy.
Manulife, which reported a $300-million loss in its second quarter on Thursday, said it expects to book additional charges of $400 million in 2013 if interest rates stay at current low levels.
"We need to remind investors of the third-quarter basis changes and that the impact of the continued macro-economic headwinds makes the achievement of our 2015 objectives more of a stretch," said chief executive Donald Guloien, referring to a previously-announced goal of hitting an earnings target of $4 billion in that year.
Sun Life Financial Inc. (TSX:SLF) warned Wednesday that persistently low interest rates could cause a further $600 million hit to its earnings by 2015 after reporting second-quarter profit slid 88 per cent to $51 million.
The Canadian insurance giants have blamed challenging equity markets and interest rates, which have been hitting insurers who invest much of the money they make from policyholders.
Meanwhile, wealth management has been an increasingly attractive niche for financial services firms as baby boomers age and younger generations see employee-sponsored pension plans erode -- phenomena that have led individuals to focus on retirement savings plans and investment portfolios.
-- The Canadian Press
Republished from the Winnipeg Free Press print edition August 10, 2012 B11
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