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John Hancock IPO Talk Is Just Speculation: Manulife CFO

August 11, 2017

Talk of Canada’s Manulife Financial spinning off its U.S. business John Hancock is just that — talk, Manulife’s CFO tells Reuters.

Analysts and the media have said that under the firm’s incoming CEO Roy Gori, Manulife could unload its U.S. assets to focus on Asia, where Gori “has deep roots,” Toronto-based Business News Network wrote on its website last week. Gori takes over as CEO on Oct. 1.

But that’s “all market rumour and speculation as far as I'm concerned," Steve Roder, Manulife’s CFO, tells Reuters. And Manulife’s outgoing CEO Donald Guloien tells the newswire that any spin-off decision would rest on what the deal would bring in terms of shareholder value. On the other hand, Gori tells Reuters that Manulife "has some challenging blocks of legacy business.”

John Hancock Tower in Boston

On a call with analysts Thursday after the second quarter earnings release, Guloien also stressed Manulife’s commitment to a presence in the U.S. market, Ignites, a Life Annuity Specialist sister publication, reported. "The U.S. market is the biggest investment market in the world," he said, according to an Ignites article. "I can’t see a time when Manulife would not be offering U.S. products in its offering, and wealth management/asset management will obviously be a big part of that."

It remains unclear how much cash the sale of John Hancock would free up for Manulife, according to BNN. Paul Holden, an analyst with the Canadian Imperial Bank of Commerce, tells the TV channel that John Hancock’s valuation as an independent firm could be between $9 billion and $10.5 billion. But because the firm’s balance sheet is evaluated using Canadian accounting methods, which are “markedly different” from U.S. accounting standards, it could be difficult to compare John Hancock’s valuation to that of its U.S. peers, Holden tells BNN.

An IPO spinoff would be a rare vote of no confidence in the North American market as it would be the first instance of a major insurance firm unloading a U.S. financial services operation with multiple products. Unlike in MetLife’s planned spinoff of its life insurance and annuities business, John Hancock’s business includes not just insurance but also wealth management, retirement planning and asset management.

Meanwhile, it’s also unclear how Manulife would use the money from the spinoff, BNN writes. Gori had headed retail and consumer banking in Asia Pacific for Citigroup, so the freed-up funds could be used to sell new products to the masses, according to the TV channel.

According to The Global and Mail, Manulife exceeded performance targets for the second quarter. Canada’s largest life insurer announced core earnings of $1.17 billion, or 57 cents per share, for the reporting period. This was higher than the Q2 2016’s performance of 40 cents a share, and analysts forecasts of 55 cents per share.

In Manulife’s 2016 annual report, the insurer reported that insurance premiums and deposits totaled $26.4 billion, up from $23.2 billion in 2015. The report fails to separately break out premiums or earnings for John Hancock.

By Alex Padalka
  • To read the Reuters article cited in this story, click here.
  • To read the Reuters article cited in this story, click here.
  • To read the BNN article cited in this story, click here.
  • To read the Ignites article cited in this story, click here if you have a paid subscription.
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