This great land hosts some great rivalries: Oilers versus Flames, Queens against McGill.
In business, there's nothing quite like the competition between Manulife and Sun Life. The fierce, long-standing enmity between these two insurers will colour the bidding war that's about to break out over U.S. targets.
And when the dust settles, there's a real chance one or both of these companies overpays on an acquisition.
The roots of the Manulife – Sun Life rivalry go back generations, to Sun's patrician Anglo Montreal roots, and Manulife's scrappy, Toronto outsider self-image. The two have battled for clients and talent in Canada, Europe and Asia for decades, with everyone from agents up to head office routinely slugging it out.
If anything, this generation of leaders has intensified the competition, with Manulife gaining the upper hand. Chippy Manulife CEO Dominic D'Alessandro has done a fabulous job of de-mutualizing, then building one of North America's premier insurers with the successful integration of John Hancock, an $11-billion takeover.
Sun Life's Don Stewart, on the other hand, stumbled on acquiring a U.S. annuities business, and leads a company that's much smaller than Manulife, and trades at a lower valuation.
Both companies are now bidding for pieces of AIG, and will be kicking tires at other troubled U.S. insurers.
Sun Life built a war chest on Monday by selling its stake in CI Financial, a leading domestic mutual fund platform, for $2.3-billion. Manulife has at least that much extra equity capital on its balance sheet, and relatively low debt levels. The stage is set for two aggressive, well-financed companies to make transformational deals.
Now, it's entirely possible that this pair ends up focusing on different targets, and never cross paths in coming weeks. But that's unlikely.
The more probably scenario sees a new chapter written in a storied Canadian rivalry. If Manulife and Sun Life end up bidding for the same troubled U.S. insurer, you can be sure the investment bankers working for the seller will stoke the flames. The business of insurance will get deeply personal.
No CEO or board will admit it, but such a dynamic can have a nasty outcome for shareholders. The 'winner' in a contested auction could end up overpaying for a busted asset. And in today's insurance industry, busted assets can contain portfolios of toxic credit products that seep out onto balance sheets for years to come.
