Manulife Financial Corp. (MFC) plans to double its insurance agents in Asia to about 100,000 in the next five years and boost the region’s share of profit to 40 percent as its shares remain 75 percent below their 2007 peak.
Canada’s largest insurer currently gets about a third of its profit from the region, half its insurance sales and one- fifth of global wealth revenue, said Robert Cook, Manulife’s senior executive vice president for Asia.
“We do obviously expect that our business in Asia will grow faster than our business in North America and as a result, those numbers should become even stronger as we move forward,” Cook said in a telephone interview from Toronto where the company is based.
Manulife, which first entered Asia 115 years ago, has been targeting rising incomes in the region, which should account for about 85 percent of the world’s 1-billion-strong middle class in five years, Cook said.
“When people enter into middle class, they become potential customers for our products,” said Cook.
Expansion in Asia is a major part of Chief Executive Officer Donald Guloien’s plan to reach C$4 billion ($3.9 billion) in net income, and return on equity of 13 percent, by 2015. Net income was C$129 million last year, down from a record C$4.3 billion in 2007 as falling interest rates and stock prices raised the cost of covering guarantees on investment products such as annuities.
Asia is “massively” important for Manulife, said Peter Routledge, analyst at National Bank Financial.
“We’re likely in a very low interest-rate environment in Canada and the United States for a very long time,” Routledge said in an interview from Toronto. “The only viable, sustainable, profitable growth part of their business is Asia.”
Manulife fell 1.3 percent to C$10.68 in Toronto trading. The shares have tumbled 75 percent from their peak in October 2007, compared with a 21 percent decline on the benchmark S&P/TSX Composite Index.
Sun Life Financial Inc. (SLF), Canada’s third-largest insurer, last month announced a joint venture in Vietnam with PVI Holdings to expand its Asian operations. MetLife Inc. (MET:US) and Prudential Financial Inc. (PRU:US), two of the largest U.S. life insurers, have expanded in Asia with the purchase of units from bailed-out American International Group Inc. (AIG:US)
Manulife ranks fifth among Canadian companies with market capitalization of more than C$5 billion deriving revenues from Asia Pacific according to data compiled by Bloomberg. Sun Life was eighth.
Profit from Manulife’s Asian operations climbed to C$1.1 billion in the first quarter of 2012, up from C$351 million a year earlier on record insurance sales and higher premiums and deposits.
Cook said India and Korea remain gaps in Manulife’s “Pan- Asian” strategy.
“The challenge with Korea is that the regulator is not granting new licenses,” said Cook. “The only mode of entry into Korea right now is acquisition.
Manulife and AIA Group Ltd. (1299) were among the companies that were invited to make second-round bids for ING Groep NV (INGA)’s Asian insurance business, people familiar with the matter said last month.
Cook declined to comment on the report.
‘‘We always look at these deals, but because of the scarcity value, we’re not the only company that would like to enter Korea,” Cook said. “Because of the scarcity value, the price tends to get driven up and doesn’t meet our expectations we set for acquisitions.”
Routledge at National Bank said Manulife is in a better position to do a deal than previously. “I know their balance sheet is in much better shape than it was two years ago, and they’ve got more flexibility to do a deal,” he said.
Manulife has tentatively planned an investor day in Hong Kong in September that will focus on the company’s Asian business, Cook said.
“One of the objectives right now to doing an investor day in Asia would be to get Asian investors interested in MFC,” he said.
Countries including Vietnam, Indonesia and China “will be the real drivers” of sales force expansion over the next five years, Cook said. Manulife has about 10,000 agents in Vietnam and about 5,000 in Hong Kong.
“Every day, we’re trying to recruit more people,” said Peter Shum, 69, a Hong Kong-based senior manager who has been with Manulife for 40 years. “We can’t have enough people, in our district and for the whole company.”
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