Manulife Financial Corp. says it is now ahead of schedule on a plan to reduce its exposure to risky investments en route to producing a record fourth-quarter profit of $1.79 billion.

Three-month stock chart for Manulife Financial. (CBC)

Canada's largest insurance company said Thursday that its earnings amounted to $1 per share, compared with a profit of $868 million or 51 cents per share in the prior-year period.

The company has been stung over several quarters by an overexposure to equities during the downturn. But higher equity markets boosted the company's earnings in the quarter by $441 million and improved interest rates contributed $604 million to the bottom line.

Analysts polled by Thomson Reuters on average had predicted earnings of 94 cents per share in the fourth quarter, but their expectations ranged widely from as low as 38 cents to as much as $1.27.

"We have made significant progress on our strategic goals," CEO Donald Guloien said in a statement.

"We are diversifying our businesses and reducing our sensitivities to equity markets and interest rates, while strengthening our capital position."

Total revenue for the quarter was down to $3.42 billion from $6.97 billion, due to the impact of $5.29 billion in losses on assets supporting policy liabilities — a charge trimmed from the company's top line before it calculates the final revenue figure.

"Manulife appears well on its way to achieving its targets within its allotted timeline," Barclays Capital analyst John Aiken said in a note. "However, we note this comes at the cost of lower upside participation by shareholders."

Though he commends the company for reducing its exposure to risk, that has also come at the expense of more gains as equity markets rise. The stock is up more than 40 per cent since it posted its previous quarterly earnings, while the TSX as a whole is up only nine per cent in that time. "We believe that near-term upside is limited," Aiken said.

For the full year, Manulife posted a net loss of $391 million after taking more than $3 billion in charges for goodwill impairment. Stripping out those charges, it would have recorded adjusted earnings from operations of $2.87 million.

Shares in Manulife were down 62 cents or 3.3 per cent at $18.30 in early trading on the Toronto Stock Exchange.

With files from The Canadian Press