On July 6, Manulife Financial (MFC) announced the issue of C$1 billion worth of notes. Manulife Financial Capital Trust II, a trust wholly-owned by The Manufacturers Life Insurance Company (MLI), will issue $1 billion of Manulife Financial Capital Trust II Notes – Series 1 due December 31, 2018.
The notes are expected to qualify as Tier 1 capital of MLI for regulatory purposes. The transaction is expected to close on July 10, 2009.
The company intends to use the proceeds from this offering to repay the amount outstanding under its credit facility. We are encouraged by such capital bolstering initiatives, as these measures will add to its financial flexibility.
Manulife has recently boosted its regulatory capital by raising C$450 million through a new preferred share issue and by entering into a reinsurance agreement to cede certain Canadian Group Benefits related exposures.
In addition, the company has also enhanced its Canadian Dividend Reinvestment Program and introduced a new dividend reinvestment program for US shareholders that replaced its US Investor Services program. During the second half of 2008, the company enhanced its capital position with a C$2.0 billion term loan and C$2.3 billion equity issue.
Though these measures will help strengthen its capital, they will also lead to further earnings dilution. We continue with our Hold recommendation on the shares of Manulife Financial.
Companies like Manulife Financial, Principal Financial Group (PFG) and Lincoln Financial Group (LNC) have been adversely impacted by the severe equity market downturn. Particularly, the variable annuity business of these companies has been worst hit. Principal Financial Group and Lincoln Financial Group have also resorted to such public offerings to bolster their capital levels.
Read the full analyst report on “MFC”
Read the full analyst report on “PFG”
Read the full analyst report on “LNC”
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