Manulife Financial Fortifies its Capital Position

TORONTO, Nov. 18 /CNW/ - Manulife Financial Corporation (MFC) today announced that it will issue $2,500,400,000 in common equity in a bought deal arranged by Scotia Capital Inc. and RBC Dominion Securities Inc. Upon closing, The Manufacturers Life Insurance Company (MLI) will have access to the highest level of capital since it became a public company.

=> $2.5B is about 8% of the total market cap.

Manulife Financial Chief Executive Officer Donald Guloien said, "We are positioning Manulife for the long term. 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."

=> With MCCSR ratio 229% as of Sep 30, 09. Bilibala think they already have more than enough capital. To determine whether the share issue is positive or negative to shareholders, we need to look at its proposal.

"Our action today is consistent with Manulife's conservative approach to capital management," he added. "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."

Manulife Chief Financial Officer Michael Bell said, "Manulife continues to enjoy solid operating performance and excellent credit experience given challenging markets. Although equity markets, interest rates and credit will continue to impact the Company's balance sheet and earnings, this transaction will strengthen Manulife's flexibility to respond to both risks and opportunities."

=> that's true. Manulife is continue to deliver solid performance, even during recession and the financial crisis.

On a pro forma basis after giving effect to the $2.5 billion offering of common equity, if the entire amount of the proceeds of the offering were invested in MLI, and reflecting market conditions as of the end of our third quarter, Manulife estimates that the pro forma Minimum Continuing Capital and Surplus Requirements (MCCSR) ratio of MLI as at September 30, 2009 would have been approximately 256% versus the 229% MCCSR reported at the end of its third quarter. This ratio, on a pro forma basis, would be the highest since MFC became a public company.

=> what is the use to such high MCCSR ratio?

A Syndicate of underwriters being led by Scotia Capital Inc. and RBC Dominion Securities Inc. in a bought deal public offering has agreed to buy $2.5 billion in Manulife common shares at a price of $19.00. The public offering is expected to close on or about November 30, 2009, subject to satisfaction of customary closing conditions.

The Company has granted the underwriters an over-allotment option, exercisable in whole or in part at any time up to 30 days after closing, to purchase up to an additional $375,060,000 in common shares at the same offering price. Should the over-allotment option be exercised in full, the total gross proceeds of the offering would be $2,875,460,000.

The estimated net proceeds from the offering will be approximately $2.413 billion, after deducting the underwriting fee and before the estimated offering expenses payable by the Company. The Company expects to use the net proceeds from this offering for general corporate purposes, which may include contributions of capital to its insurance and other subsidiaries, potential acquisitions or other growth initiatives. The Company has not yet made a determination as to how much of the proceeds will be invested in MLI and how much will be used for other corporate purposes. Following the offering, the Company also intends to retire the approximately $1 billion outstanding indebtedness under its Credit Facility with Canadian chartered banks using other cash resources of the Company.

=> 3.48% floatation cost, reasonable, but to me, still high. Other than paid down $1B debt, it do not have any plan yet :(

Michael Bell said, "While the common equity issue is expected to be dilutive to the Company's Earnings Per Share (EPS) and Return on Equity (ROE), the Company believes that strengthening its capital position is in the best long term interests of the Company and its shareholders."

=> at this point in time, Bilibala will keep Manulife's fair value at CA$32.0

The common shares to be offered have not been and will not be registered under the U.S. Securities Act of 1933, as amended (U.S. Securities Act), and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the U.S. Securities Act. This press release is not an offer to sell or the solicitation of an offer to buy such common shares in the United States or in any other jurisdiction where such offer is unlawful.

Manulife Financial is a Canadian-based financial services group serving millions of customers in 22 countries and territories worldwide. Operating as Manulife Financial in Canada and Asia, and primarily through John Hancock in the United States, the Company offers customers a diverse range of financial protection products and wealth management services through its extensive network of employees, agents and distribution partners. Funds under management by Manulife Financial and its subsidiaries were $437 billion (US$407 billion) as at September 30, 2009.

Manulife Financial Corporation trades as 'MFC' on the TSX, NYSE and PSE, and under '945' on the SEHK. Manulife Financial can be found on the Internet at www.manulife.com.