For one week this past month, as Manulife prepared to unveil yet another massive loss, the company's 18-member board of directors pounded the pavement in Beijing and Shanghai.
Some of Canada's most prominent business figures - including Gail Cook-Bennett, former chair of the Canada Pension Plan Investment Board, and Robert Harding, chairman of Brookfield Asset Management Inc. - hopped on and off buses, lunch boxes in tow, as they toured insurance offices, met with employees at company dinners, and saw for the first time the operations of Manulife's new Chinese wealth management venture.
Manulife, which lost more than $3.3-billion in the two most recent quarters, is fighting to restore its reputation, and Asian expansion is a key part of its strategy. For the company's board and executives, Manulife's recent troubles are all the more reason why it should be muscling into an area of the world that is enjoying robust growth.
On Friday, executives gathered with analysts and investors in Toronto to outline how the insurer hopes to raise its annual profit to $4-billion and its return on equity to 13 per cent by 2015. The strategy hinges on success in Asia - where the firm believes it has built up an enviable position, and which it describes as its growth engine for the 21st century - as well as wealth management sales.
A one-time darling of Canadian investors, Manulife fell hard during the financial crisis as the guarantees on many of its investment products produced a flood of red ink. Its share price plunged to one-third of its level preceding the downturn. Low interest rates and rocky stock markets will challenge its North American operations for a long time to come, and upcoming changes to regulations and accounting rules pose a threat. Canada's largest insurers are scheduled to meet with Sir David Tweedie, the chairman of the London-based International Accounting Standards Board, next week in an effort to kill proposed accounting changes that could have a large negative impact on them.
But low interest rates, rocky stock markets and changing capital rules will challenge its North American operations for a long time to come.
With its business at home under fire, Manulife is in the vanguard of Canadian financial institutions trying to seize the lusher opportunities across the Pacific. It's no coincidence that the three most recent additions to the firm's board - former banking and insurance regulator John Palmer, Teck Resources Ltd. CEO Don Lindsay, and former ambassador to the People's Republic of China Joseph Caron - each have experience in Asia. Buoyed by its success in Japan, where it has a substantial and profitable operation, Manulife has been pushing into countries such as Vietnam, the Philippines and Malaysia, where the profits are still minimal but the growth potential is off the charts.
None of those countries, though, holds the potential of China, with its burgeoning number of millionaires and sky-high savings rate. Manulife has already gained traction selling insurance in the country. Now it's seeking to gain a foothold in China's fast-growing wealth management business. It broke into that industry in March when it was able to secure a 49-per-cent stake in a Chinese fund management company.
For a company so badly bruised by the financial crisis, the stakes are high. If its Chinese gambit succeeds, Manulife may be able to reignite its long-term growth. "While it's not all about China, China is obviously a very important piece," says chief executive officer Don Guloien.
The danger is that China could prove to be a sinkhole for Manulife's money and time. Already, some foreign insurers have pulled back from the market, saying they can't overcome the home field advantage of China's domestic firms. Analysts and investors wonder when - or if - Manulife's push into China will finally start to boost the company's battered bottom line.
The perils of partnership
Manulife is no stranger to China. In 1996, it became the first foreign company to partner with a Chinese firm and create a joint venture life insurer when it teamed up with Sinochem Group, a state-owned company.