Manulife Financial Exploring John Hancock IPO, Spin Off?

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Some shareholders of Manulife Financial Corporation (TSX: MFC) are unhappy with John Hancock’s financial performance in recent years

SmallCapPower | July 17, 2017: Manulife Financial Corporation (TSX: MFC) is considering spinning off its Boston-based insurer John Hancock group or pushing the firm into an initial public offering, the Wall Street Journal has reported, citing unnamed sources familiar with the plans.

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Manulife acquired Hancock for US$10.9 billion in 2004. Some of Manulife’s shareholders are unhappy with John Hancock’s financial performance in recent years, which reported a 22% decline in net income to US$1.13 billion in 2016. Life insurers in general are struggling with low interest rates, which dampen investment profits, and rivals such as MetLife and AXA have already moved to shed life insurance operations.

In addition to offering life insurance and other insurance products, John Hancock has a wealth management division. John Hancock makes up a substantial portion of Manulife’s business. In 2016, the Company’s U.S. division was responsible for 46% of the Manulife’s total premiums and deposits and 56% of its assets under management and administration. John Hancock had stopped selling new individual long-term care policies last year after the parent company had publicly discussed about divesting the business.

In terms of valuation, Manulife currently trades at price to TTM sales of 1.14x, price to book of 1.26x, and forward PE of 10.43x.

Disclosure: Neither the author nor any of the principals at Small Cap Power, or their family members, own shares in any of the companies mentioned above.

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