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WIKI ANALYSIS
Manulife Financial Corporation (MFC) is a broad-based financial services firm headquartered in Toronto, Canada. It converted from a mutual life insurance company to an investor-owned, publicly traded company in July 1999. The company provides a wide range of financial products and services, including life insurance, group life and health insurance, pension products, annuities, and mutual funds to individual and group customers in the US, Canada, Asia, and Japan. The company operates as Manulife Financial in Canada and Asia, and primarily through John Hancock (which merged with Manulife in April 2004) in the United States.
The company offers clients a diverse range of financial protection products and wealth management services through its extensive network of employees, agents, and distribution partners. Manulife provides mutual fund services through Elliot & Page, Ltd., and investment and asset management services through Seamark Asset Management, Ltd. It is also a major player in the North American real estate market. It has an extensive global network of employees, agents, and distribution partners operating in 15 countries across the world. Insurance premium income accounted for 55.9% of the firm's total revenue, investment income brought in 30.5%, and others contributed 13.6% in 2006.
For reporting purposes, Manulife segregates its diverse operations into five broad divisions: US Insurance, US Wealth Management, Asia & Japan, Reinsurance, and Canada. Prior to June 2005, the Asia and Japan divisions were separated for reporting purposes.
After the merger with John Hancock Financial, Manulife stands as Canada's largest life insurance company, largest financial institution, and largest public company, based on market capitalization. In North America, the company ranks as the second largest life insurer, based on market capitalization, and, with approximately 20,000 employees serving millions of customers in 19 countries and territories, the company ranks as the fifth largest life insurance company in the world. In terms of solvency, Manulife maintains a strong balance sheet, high liquidity level, and strong financial strength ratings reflected by A.M. Best's financial strength rating of A .
Through the company's diverse business model and expense control efforts, we believe the momentum the company has built up in both its insurance and wealth management sales will continue to grow the top-line and generate strong profits going forward. Indeed, the company strong demand for variable annuity and 401(k) products in the US and Canada are driving top-line growth at the company, while sales in Japan have also started to improve. Manulife-Sinochem continued to expand its operations in China. In 3Q07, two additional licenses were received, bringing the total up to 23 licenses. The integration of John Hancock more than doubled MFC's funds under management to C$380.7 billion at the end of the fourth quarter of 2004. Total funds under management as on September 30, 2007 were C$399 billion. The company is using its scale to expand its operations overseas. In May 2005, the company entered into an agreement that helped to diversify distribution in Hong Kong, which in turn led to an 11% sequential increase in new annualized premium in China. Manulife's ability to grow its business, improve its expense position, and enjoy favorable claims experience will, we believe, drive bottom-line growth and ROE expansion. Adjusted ROE resided at 18.9% for 3Q07, up 230 basis points from the prior year quarter.
The company continues to focus on aggressive growth and product innovations.
In Japan, MFC introduced new Variable Annuity products through MUFJ, which resulted in a 330% increase in variable annuities sales in this quarter.
Introduced Taiwan's first variable annuity product.
Two new survivorship variable universal life products in the U.S.
In China expansion continues with MFC having 23 city licenses.
On September 25, 2007, the company's key insurance subsidiaries were upgraded to" Aa1 from "Aa2" by Moody's Investors Service, making Manulife Financial one of the two publicly traded life insurance companies in North America with such ratings. This reflects the company's success in persistently strengthening its diversified and predictable earnings profile, its excellent financial flexibility and conservative capital structure, and its durable, well-positioned franchises in North America and Asia.
With regard to the direct or indirect exposure to subprime portfolios and CDOs, it is evident that the company is continuously working on reducing its exposure. The company has about $40 million of such securities maturing each month, which is rolling off its books. We would anticipate the subprime portfolio of approximately $720 million at the end of 2007, with approximately 18 months before the portfolio completely rolls off. Thus, the company may ultimately not have significant losses associated with its subprime portfolio in the near future. In addition, the company has no CDOs and no third party asset backed commercial paper. Overall, the company is in a less risky position related to these assets.
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