Manulife Financial Corp. on Thursday reported a 17% increase in second-quarter net earnings, but results fell short of analyst and company expectations as lower interest rates and market volatility weighed on the insurer.

Canada's largest insurance company by assets also warned that it could book a charge this year of up to 500 million Canadian dollars ($383 million) related to its annual review of actuarial methods and assumptions.

Toronto-based Manulife said it earned C$704 million, or 34 Canadian cents a share, in its latest quarter. That is up from a profit of C$600 million, or 29 Canadian cents a year earlier.

It said core earnings, which exclude one-time items, fell to 40 Canadian cents a share from 44 Canadian cents a year earlier, missing the Thomson Reuters mean estimate for earnings of 46 Canadian cents a share.

"While both core earnings and net income this quarter were disappointing, having been impacted by the sharp decline in interest rates and heightened market volatility, I am pleased with how resilient our underlying businesses remained," Chief Executive Donald Guloien said in a release.

The surprise U.K. decision to leave the European Union sent Canadian and U.S. government bond yields lower, creating headwinds for life insurance companies which are sensitive to interest-rate shifts as a result of investing customers' premiums in bonds.

Manulife said its minimum continuing capital and surplus requirements ratio, a key measure of capital strength, was 236% at the end of June.

The company said it is in the early stages of completing its annual third-quarter assumptions review and said preliminary indications suggest it could results in an after-tax charge of up to C$500 million.

Canadian insurers Manulife and smaller rival Sun Life Financial Inc. generally offer assumption-review guidance alongside second-quarter results, according to Desjardins Capital Markets. Ahead of the latest results, Desjardins had guided for a smaller C$200 million charge for Manulife.

Sun Life, Canada's third-largest insurance company by assets, is due to report second-quarter results on Aug. 10.

Write to Judy McKinnon at judy.mckinnon@wsj.com

(END) Dow Jones Newswires

August 04, 2016 08:35 ET (12:35 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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