S&P’s cuts Man­ulife rat­ings

The Pak Banker - - Company& -

NEW YORK: Man­ulife Fi­nan­cial Corp., the Cana­dian in­surer that owns Bos­ton­based John Han­cock Fi­nan­cial, had credit rat­ings cut by Stan­dard & Poor's on con­cern that U.S. earn­ings "will be weaker than his­tor­i­cal lev­els."

The long-term coun­ter­party credit rat­ing was low­ered to A-from A, S&P said to­day in a state­ment. Rat­ings on Man­ulife in­surance sub­sidiaries in­clud­ing the Man­u­fac­tur­ers Life In­surance Co. and John Han­cock Life In­surance Co. fell to AA-from AA. Man­ulife halved its div­i­dend last year and has missed the an­a­lyst profit es­ti­mates in 8 of the last 11 quar­ters.

"The prospec­tive earn­ings pro­file of the U.S. op­er­a­tions will be weaker than his­tor­i­cal lev­els given the cur­rent eco­nomic en­vi­ron­ment," S&P said in the re­port. "The firm's eq­uity and in­ter­est rate risk, while de­clin­ing, still re­mains high rel­a­tive to its peers."

Man­ulife fell 10 cents to C$16.79 at 4:06 p.m. in com­pos­ite trad­ing on the Toronto Stock Ex­change.

It has fallen 13 per­cent this year, com­pared with the 9.5 per­cent gain by the S&P/TSX 60 in­dex of Canada's largest and most heav­ily traded com­pa­nies.

Lau­rie Lupton, a spokes­woman for Toronto-based Man­ulife, didn't im­me­di­ately re­spond to a phone call and email seek­ing com­ment.

In a sep­a­rate news item, Bea­z­ley Plc ended talks to buy Hardy Un­der­writ­ing Ber­muda Ltd. af­ter the small­est pub­licly traded Lloyd's of London in­surer spurned a third, sweet­ened bid of about 181 mil­lion pounds ($287 mil­lion).

Bea­z­ley of­fered as much as 350 pence a share on Dec. 1, the Dublin-based com­pany said in a state­ment to­day. The fifth-biggest Lloyd's in­surer orig­i­nally of­fered 300 pence a share in Oc­to­ber, be­fore rais­ing its bid to 330 pence, or 171 mil­lion pounds, last month.

" Hardy's ad­vis­ers con­firmed that the Hardy board would only be pre­pared to rec­om­mend a price sub­stan­tially in ex­cess of the fi­nal pro­posal and, as a re­sult, Bea­z­ley to­day an­nounces the with­drawal of its in­ter­est," the com­pany said.

Bea­z­ley's sec­ond of­fer val­ued Hardy at about 1.4 times the com­pany's book value.

Fel­low Lloyd's in­surer Brit In­surance Hold­ings NV agreed to be sold to Apollo Global Man­age­ment and CVC Cap­i­tal Part­ners Ltd. for 888 mil­lion pounds, or about the equiv­a­lent of book value, in Oc­to­ber.

Hardy said on Nov. 26 it would buy back stock from in­vestors af­ter spurn­ing Bea­z­ley's ap­proach. A third party, which it didn't name, has agreed to pledge cap­i­tal to sup­port its un­der­writ­ing unit at Lloyd's.

The move will help the firm to ex­pand with­out rais­ing funds from share­hold­ers, the com­pany said.

Bea­z­ley rose 0.8 per­cent to 113.8 pence in London trad­ing yes­ter­day, while Hardy fell 2.4 per­cent to 282 pence

More­over, a slump in govern­ment-backed mort­gage bonds that's sent yields to the high­est level since May is threat­en­ing a re­cov­ery in the U.S. hous­ing mar­ket, which had been bol­stered by record­low bor­row­ing costs.

Yields on Fan­nie Maeguar­an­teed se­cu­ri­ties that most af­fect loan rates jumped as high as 4.21 per­cent yes­ter­day, an in­crease of 1 per­cent­age point from an all-time low in Oc­to­ber, ac­cord­ing to data com­piled by Bloomberg. They ended New York trad­ing at 4.1 per­cent.

Higher loan rates "won't be fun" for a frag­ile hous­ing mar­ket, said Scott Simon, head of mort­gage bonds at New­port Beach, Cal­i­for­nia-based Pa­cific In­vest­ment Man­age­ment Co., man­ager of the world's biggest bond fund. "If you were look­ing at buy­ing a house a few weeks ago, the same house, to you, looks as much as 9 per­cent more ex­pen­sive," he said.

In­vestors in agency mort­gage se­cu­ri­ties have suf­fered dur­ing this month's crash in bond prices amid spec­u­la­tion that Pres­i­dent Barack Obama's agree­ment to ex­tend and ex­pand tax cuts will bol­ster growth and in­fla­tion.

While the drop hasn't been as se­vere as for Trea­suries, the ef­fects of higher mort­gage rates, along with climb­ing gaso­line prices, will off­set much of the tax pack­age's in­tended stim­u­la­tive ef­fects, ac­cord­ing to Gluskin Sh­eff & As­so­ci­ates Chief Econ­o­mist David Rosen­berg. -Bloomberg

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