S&P’s cuts Manulife ratings
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