Manulife Financial Corp. may not have pulled off the biggest deal in insurance history, but its CEO says it is better off now that British rival Prudential PLC is grabbing a prized Asian business from American International Group Inc. for $35.5-billion (U.S.).
"To some degree [it's]a disappointment because I think Manulife had the wherewithal to be one of the few companies that could have closed a deal like that at one point in time, but ... at a totally different price," Manulife chief executive officer Don Guloien said in an interview.
AIG, the insurance behemoth that the U.S. government bailed out at the peak of the crisis, signed a deal this month to sell AIA Group, which sells life insurance and wealth management products in Asia, to Prudential for $35.5-billion (U.S.) including about $25-billion in cash.
Manulife was interested in AIA in early 2009, sources said at the time, but was not willing to pay what AIG believed to be fair market value.
Manulife has completed more than 25 takeovers in 15 years, and its executives pride themselves on being disciplined when it comes to price.
The firm was also contending with one of the most significant headaches it has ever faced as plunging stock markets forced it to shore up its capital levels. And Canadian financial institutions' acquisition ambitions are constrained these days by the regulator, the Office of the Superintendent of Financial Institutions. OSFI has made it clear that it would not approve deals that use up too much of a company's cash or drain its capital.
While there may be a tinge of disappointment that Prudential pulled off this deal, Mr. Guloien said Manulife will benefit. "Seventy or 80 per cent of acquisitions fail in the end to deliver for the shareholders, and the principle reason is overpaying up front," he said. "I'm not saying necessarily that [Prudential]overpaid, I'm saying that they're proposing an extremely full price.
"If they are successful at closing the deal ... we expect that they will need to be very, very disciplined."
Manulife has a solid strategy to keep up its growth in Asia, he said. There are only a couple of gaps left, India and South Korea, and it hopes to fill those in the next decade.
It's been a big week for Manulife in China. It closed a deal to buy Fortis Bank's 49-per-cent stake in a fund management company there for $156-million, spurring the creation of a joint venture called Manulife TEDA Fund Management Co. Ltd. Manulife will be able to offer its Chinese insurance customers mutual funds for the first time.
MFC Global Investment Management was recently granted a Qualified Foreign Institutional Investor licence, and hopes to soon receive a quota from Chinese regulators. That will enable it to offer institutional and retail investors in North America and elsewhere access to China's fixed income and stock markets.