Manulife Financial expects to take a charge of about $250 million in the third quarter due to credit losses. That includes approximately $50 million due to reserve strengthening as a result of credit downgrades.
Despite these charges, the insurance company says asset quality remains very high.
“Due to generalized spread widening, the gross unrealized losses on fixed income securities have expanded to approximately $6 billion, a relatively modest amount given total invested assets of $165 billion at Sept. 30, 2008,” says a company statement. “Manulife has the ability to hold these securities until maturity, has provided for the expected level of defaults in its actuarial reserves, and would expect no significant earnings impact in respect of these gross unrealized losses.”
Of the $6 billion, the company has approximately $200 million of exposure to fixed income securities trading down 20% or more for at least six months, which it says a modest amount given the large size of its overall portfolio.
“Manulife remains conservatively reserved, has a high quality balance sheet, and strong and leading business franchises around the world,” says Dominic D’Alessandro, the insurance firm’s president and chief executive officer. “We are well positioned to weather these difficult times and continue to build for the future.”
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