Manulife Financial Corp. MFC-T launched a $2.5-billion stock sale late Wednesday as the life insurer moves to build what its chief executive officer described as ‘fortress levels of capital.”
Canada's largest insurer rolled out its second massive equity offering of the past 12 months – it sold $2.275-billion of stock last December – as newly named CEO Donald Guloien attempts to shore up a balance sheet that is weighed down by exposure to the drop in equity markets. Manulife sold its clients billions of dollars worth of guaranteed savings products that were invested in stocks, and these annuities and other funds now represent an enormous potential liability for the company.
The financing, which dilutes the ownership stake of Manulife's existing shareholders, shows that financial services companies are still concerned about the future of stock markets and the economy, despite the rally in equities that has played out since March.
“We are positioning Manulife for the long term,” Mr. Guloien in a news release. “We believe this transaction achieves the fortress level of capital necessary to buffer against more conservative economic scenarios and to position us to take advantage of highly attractive acquisition and growth opportunities.”
A syndicate of underwriters being led by Scotia Capital In and RBC Dominion Securities Inc. agreed to buy $2.5-billion in Manulife common shares at a price of $19 each. That is a 6 per cent discount to Manulife's $20.18 closing price Wednesday on the Toronto Stock Exchange.
“Our action today is consistent with Manulife's conservative approach to capital management,” said Mr. Guloien. “Achieving these strong capital levels enables us to offer an even higher degree of security to present and future customers. It also gives us tremendous flexibility.”
