Manulife Completes AIC Deal

Manulife Financial Corporation (MFC - Analyst Report) has closed the transaction to purchase AIC's Canadian retail investment fund business. This acquisition significantly expands Manulife’s wealth management reach.

All AIC funds in Canada will now be managed by Manulife Mutual Funds, while Portland Investment Counsel (formerly AIC Investment Services) will continue as a fund sub-advisor for certain AIC funds.

We believe that this acquisition will considerably add to Manulife’s scale and strengthen its position in the retail investment fund market in Canada. Based on latest industry figures, overall retail fund assets under management for Canadians will grow 38% to approximately $13.9 billion as a result of this acquisition.

Manulife’s wealth management business has been severely impacted by the turbulence in the equity market on a global basis. During the second quarter, wealth sales were down 11% year over year or 19% on a constant currency basis.

While the company reported strong sales in fixed products in the U.S. and Canada, it was more than offset by the decrease in variable product sales across Manulife’s footprints. Sales of variable annuity, which are typically equity-related products, declined 30% year-over-year in the second quarter as a result of the company’s risk management initiatives and weak economic conditions.

As a result of the severe downturn in the equity market in the last few quarters, the balance sheets of insurance and wealth management companies have been challenged. Besides Manulife, the balance sheets have been impacted adversely for many other companies such as Principal Financial Group (PFG - Analyst Report), Lincoln Financial Group (LNC - Analyst Report) and Hartford Financial Services Group Inc. (HIG - Analyst Report). However, we think that the recent rebound in the equity markets should provide some relief to these companies.