D'Alessandro says Manulifes costs are under control

In almost every industry on the planet, costs are rising. It's either energy costs due to the price of oil, or labour and operating costs keeping up with inflation, or a combination of factors.

Manulife Financial, one of Canada's biggest companies, just behind RBC in market cap, has been growing enormously in the past two years, and until recently showed great promise. Just recently profit at Manulife Financial Corp. fell 8.5 per cent in the second quarter, missing analyst forecasts, as weak equity markets, a stronger Canadian dollar and tax-related provisions all took a toll.

But Manulife, North America's No. 2 life insurer, also raised its dividend by eight per cent to 26 cents a share, and stressed that its insurance and wealth management sales grew by double digits.

"We again experienced excellent sales results in almost every one of our businesses," CEO Dominic D'Alessandro said during a conference call.

He said the company's costs are under control, it is expanding and gaining market share.

"We don't run the business for quarter-to-quarter purposes, we run it for the long term ... we look forward to continuing to deliver strong results in the periods ahead, no matter what the economic conditions are," D'Alessandro said.

Manulife earned $1.01 billion, or 66 cents a share, down from year-earlier $1.1 billion, or 71 cents a share.

Analysts had expected profit of 71 cents a share before exceptional items, according to Reuters Estimates.

"Obviously, the headline number was short of consensus, it's a slight miss," said Jukka Lipponen, insurance analyst at investment bank Keefe, Bruyette & Woods.

"In the corporate segment they had a loss, and I was looking for positive earnings. But in terms of top-line growth, they had a lot of strength in a number of areas."

Excluding currency movements, insurance sales rose 18 per cent and wealth management sales climbed 14 per cent.Toronto-based Manulife, which operates in Canada, the United States and Asia, said charges from insurance sales growth, less favourable credit and equity markets and tax-related charges on leveraged lease investments more than offset improvements in earnings from a higher insurance in-force base and investment gains.

Equity market declines, primarily in the U.S. and Hong Kong, hurt fee income while the higher Canadian dollar trimmed earnings by $41 million in the quarter, Manulife said. About 70 per cent of its income is denominated in foreign currencies.

The year-over-year currency drag should abate in upcoming quarters, RBC Capital Markets analyst Andre-Philippe Hardy said in a research note.