(B)(N) MFC Manulife Financial Corporation

Deal Book. Manulife Financial continues to struggle as far as its own stock price is concerned (please see Exhibit 1 below) and begs the question, If you’re so smart, why aren’t you rich? And it would seem to be the smart thing for us to only deal with financial advisers who are rich, if there are any and if those who are will trouble to deal with us.

We said in August (please see our Post, (B)(N) There And Done That, August 2012) that insurance companies are particularly affected by “weak” capital markets in both equities and bonds (or fixed income) because segregated funds are required to guarantee the capital that they have invested in the equity markets (all kidding aside absent the Perpetual Bond™) and it’s a double whammy because they also need investment income in order to meet their own capital requirements and future liabilities. If they can’t earn income in the capital markets, what are they going to do but raise their premiums and cut their sales commissions (another double whammy but not unlike what is happening in most public and private pensions plans) and if they can’t earn income in the capital markets for themselves, what are they going to do for us?

MFC Manulife Financial Corporation had a market capitalization of $60 billion in 2007 and today it’s $20 billion while at the same time increasing its common shares outstanding from 1.4 billion shares in 2007 to 1.8 billion shares today and its “investments” under management in the equity markets from $90 billion to the current $180 billion. One might say, twice the “investments” and 1/3  or less the stock price in the past five years, all the while keeping the shareholders equity at a steady $25 billion in order to meet regulatory requirements.

We last owned the stock in a Perpetual Bond™ between $15-$20-$18 in 2009 (Red Line above the Black Line) but have not been able to own it since simply because the ambient stock prices are in a trading range below the Risk Price (SF) (Black Line, step-function) which has been steadily declining from $17 in 2009 to the current $13. The company also pays a dividend of $0.52 per share or $950 million per year in total for a current yield of nearly 4% which, on balance, is more than they can make on their own investments. They would do well to buy more of themselves, one would think.

Exhibit 1: (B)(N) MFC Manulife Financial Corporation – Risk Price

Manulife Financial is a leading Canada-based financial services group with principal operations in Asia, Canada and the United States.

(Please Click on the Chart to make it larger if required.)

In 2012, Manulife Financial celebrates 125 years of providing clients strong, reliable, trustworthy and forward-thinking solutions for their most significant financial decisions. Our international network of employees, agents and distribution partners offers financial protection and wealth management products and services to millions of clients. We also provide asset management services to institutional customers. Funds under management by Manulife Financial and its subsidiaries were C$515 billion (US$523 billion) as at September 30, 2012. The Company operates as Manulife Financial in Canada and Asia and primarily as John Hancock in the United States (Company press release, December 4, 2012, Manulife Financial Corporation completes Preferred Share offering).

Postscript

We are The RiskWerk Company and care not a jot for mutual funds, hedge funds, “alternative investments”, the “risk/reward equation” and every other unprovable artifact of  investment lore. We have just one product

The Perpetual Bond™
“Alpha-smart with 100% Capital Safety and 100% Liquidity”
Guaranteed
With No Fees and No Loads on Capital

For more information on RiskWerk, please follow the Tags or Categories attached to this Letter or simply enter Search for additional references to any term that we have used. Related data may be obtained from us for free in a machine readable format by request to RiskWerk@gmail.com.

Disclaimer

Investing in the bond and stock markets has become a highly regulated and litigious industry but despite that, there remains only one effective rule and that is caveat emptor or “buyer beware”. Nothing that we say should be construed by any person as advice or a recommendation to buy, sell, hold or avoid the common stock or bonds of any public company at any time for any purpose. That is the law and we fully support and respect that law and regulation in every jurisdiction without exception and without qualification to the best of our knowledge and ability. We can only tell you what we do and why we do it or have done it and we know nothing at all about the future or the future of stock prices of any company nor why they are what they are, now. The author retains all copyrights to his works in this blog and on this website. The Perpetual Bond®™ is a registered trademark and patented technology of The RiskWerk Company and RiskWerk Limited (“Company”) . The Canada Pension Bond®™ and The Medina Bond®™ are registered trademarks or trademarks of the Company as are the words and phrases “Alpha-smart”, “100% Capital Safety”, “100% Liquidity”, ”price of risk”, “risk price”, and the symbols “(B)”, “(N)” and N*.