Worries About Manulife's Capital Ratios Drive Shares Lower

10/27/2008 Worries About Manulife's Capital Ratios Drive Shares Lower10/27/2008

By Monica Gutschi Of DOW JONES NEWSWIRES TORONTO (Dow Jones)

--Investors have become increasingly concerned that sagging equity markets could force Manulife Financial Corp. (MFC) to raise capital. Manulife shares are down sharply again Monday, trading C$6.24, or 23%, lower to C$23.41, a four-year low. The shares have lost 37% in the past month. Genuity Capital Markets cut its target on the Toronto-based insurer to C$30 from C$35, citing the company's increased need to raise reserves for its segregated fund guarantees. Analyst Mario Mendonca said Manulife needs to either lower the capital requirements on those guarantees by C$2 billion, or raise C$4 billion in capital - or find some combination of the two solutions. BMO Capital Markets, which cut its target on Manulife to C$32 from C$37 on Friday, estimates the company may need to raise C$3-$5 billion to keep its capital ratios within stated targets. And RBC Capital Markets said Monday it believes there is an "increasing likelihood that Manulife will evaluate options to strengthen its capital ratios." Analyst Andre-Philippe Hardy said that, unless equity markets recover, Manulife may need another C$2 billion in capital. The concerns center around the company's equity-linked products, such as variable annuities and segregated funds, which guarantee the principal in the event of a market decline. Given the 40% drop in the S&P 500 index since the start of the year, analysts say Manulife will need to raise its reserves to fund those guarantees. Earlier this month, Manulife said it would take a C$250 million charge in the third quarter, mainly related to credit losses, but also including C$50 million to strengthen reserves. At the time, the company said it was confident its capital ratios would recover and had no plans to issue equity. At the end of the third quarter, Manulife's Minimum Continuing Capital and Surplus Requirement ratio, or MCCSR, was 183%, just above its 180% target and significantly above the regulatory minimum of 150%. According to BMO, the company held C$17 billion in capital at the end of the quarter. But analysts say the rapid decline in equity markets in the quarter may have changed the situation. The S&P 500 has fallen 24% since the fourth quarter began on Oct. 1. While Manulife isn't expected to issue common equity, observers now say it could issue debt or preferred shares, could sell non-core businesses, or shift capital from other areas of the company. Genuity's Mendonca suggested the company could ask regulators for a temporary change in capital standards, or alter its internal models. He also suggested that, unless it can improve capital ratios, it may have to "sit out" the consolidation of the U.S. insurance industry. Manulife is widely expected to bid for assets that may become available in the U.S. as insurers there struggle with financial issues of their own. A spokeswoman for Manulife didn't have an immediate comment. The company is expected to release its third-quarter earnings on Nov. 6. RBC and BMO have investment-banking relationships with Manulife but Genuity doesn't. None of the analysts cited owns Manulife shares.

Manulife Financial CorpMFC:NYSE 最後價格(Last): $16.55 變幅 : -2.77 (-14.34%) 截至收市為止