SAN FRANCISCO (MarketWatch) - Manulife Financial shares dropped almost 15% Monday after a Canadian regulator said the insurer didn't disclose risks in its variable annuity and segregated funds business properly.

Shares of other variable annuity providers including Hartford Financial (HIG) , Prudential Financial (PRU) and Lincoln Financial (LNC) also fell during afternoon action on Monday.

Manulife (MFC) said late Friday that it received an enforcement notice from staff of the Ontario Securities Commission, or OSC, last week about its disclosure before March 2009 of risks related to its variable annuity guarantee and segregated funds business.

OSC staff claim Manulife failed to meet its continuous disclosure obligations related to its exposure to market price risk in its segregated funds and variable annuity guaranteed products.

"The Company believes that its disclosure satisfied applicable disclosure requirements," Manulife said.

The insurer has the chance to respond to the warning before OSC staff decides whether to start proceedings against it. Manulife said it plans to cooperate with OSC staff.


Some variable annuity providers have been hit hard by the stock market slump because their products have market guarantees embedded in them. Providers hedge such risks, but when stocks slump as much as they have in the past year, this becomes tricky.

Several providers have taken big charges related to their variable annuity businesses. Hartford has suspended its U.K. and Japan variable annuity sales and scrapped expansion plans in Europe earlier this year.

Manulife shares fell 14.9% to $17.51 during afternoon action on Monday. The stock has climbed 3% so far this year.

Hartford shares declined 10% to $11.11, while Prudential and Lincoln lost more than 6%.

Hartford shares are down 32% so far in 2009, while Prudential is up 18% and Lincoln is down 16%.

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