A source familiar with the life insurer said senior management and the board not only thought they had "restored capital reserve levels" with the bank debt and share issue, they figured they had "weathered the storm. The fallout from the financial meltdown -- and the subsequent regulatory intervention -- had put Manulife in the watchdog's penalty box. Regulatory officials were increasingly concerned that Manulife's senior management may have taken risks without fully engaging the company's directors -- or worse, without the board's knowledge.
To that end, they met with Ms. Cook-Bennett and Mr. De Wolfe, who reassured the regulator that was not the case.
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But OSFI staff was not persuaded. It was really bizarre. To allay its concerns, the federal supervisor demanded Manulife initiate an independent review of its internal practices. A team of auditors from Deloitte spent the first two months of at Manulife's Toronto head office reviewing activities and documents dating back from Jan. Twenty-four senior managers and board members were interviewed while the auditors communicated regularly with OSFI and Mr. In a "supervisory letter" dated Feb. Generally, a financial institution with this rating is considered by the regulator to have above-average overall risk, which is not sufficiently mitigated by capital and earnings.
According to documents reviewed by the Post, OSFI raised its risk rating of Manulife because of the insurer's "continued exposure to negative movements in the equity markets and senior management's failure to effectively control the risk.cabusisri.ga
Manulife: How Domenic D'alessandro Built A Global Giant And Fought To Save
It was the first time the giant life insurer had been assessed such a high composite risk rating since becoming a public company. Nine days later, on Feb. In its Feb. Meanwhile, Manulife's hopes for acquiring the Asian assets of troubled U. The review concluded that the insurer's internal risk reporting, including to the board, was "comprehensive. Deloitte's review also found that Manulife had a "disciplined risk-management culture with a strong senior management team. Still, the Deloitte report was not a complete vindication for Manulife.
It outlined 14 key recommendations and observations, from "management should have initiated the required actions earlier," to the company's risk agenda also needed more focus and time at the board. Overall, Deloitte concluded it was clear senior management at Manulife had an "appetite for equity risk" and a number of executives and directors indicated there was a belief that the company's strong balance sheet could continue to support the growth of the products.
However, the incremental nature of these actions was not sufficient to address the escalating magnitude of the total risk exposure," the review declared. While Manulife began preparing to act on the recommendations, sources say OSFI was not satisfied and requested the report be revised. D'Alessandro and his senior management team agreed to allow Deloitte to modify the document as long as the substance of the findings was not changed.
When the final report was delivered to Manulife's board and OSFI in April, , the executive summary, including laudatory comments about Manulife, were placed in the back and recommendations listing ways the insurer could improve its operations were moved to the front.
Amid this tense atmosphere -- and with millions of dollars shaved from the value of his own stock options -- Mr. D'Alessandro officially retired from Manulife as planned in early May A proud man accustomed to calling the shots, not dodging them, Mr. D'Alessandro believed OSFI's intervention "dramatically disturbed a very important company that had everything going for it," said a source close to the former chief executive.
In his inaugural address to shareholders, Mr. Guloien, who had also served as the life insurer's chief investment officer, said there was little difference in style or vision between himself and Mr. D'Alessandro-- only that they would be operating in different environments.
Manulife - Wikipedia
Yet in that first address to shareholders as CEO, Mr. Guloien gave early indications of the dramatic shift to come when he spoke of adopting a conservative approach to risk -- he advocated reducing it -- and strengthening capital levels. Perhaps more important was what he didn't say.
The company's board had begun mulling a possible dividend cut at a meeting on May 6 -the day before the annual general meeting. Sources say most directors weren't comfortable with taking such a drastic step and angering shareholders. Manulife's board agreed to defer making a decision until a thorough review could be done by the new senior management team. On Aug. Barely three months in the corner office, Mr.
Guloien appeared willing to anger shareholders by making taking an unpopular measure to rebuild Manulife's balance sheet. Manulife's capital levels had to be boosted well beyond OSFI's minimum levels that it could withstand any a reasonable range of negative scenarios in the economy or financial markets. Three months later, on Nov. The bought deal was the second largest in Canadian history. Guloien said at the time of the issue. After months of talk about fortress capital, the market began worrying there may be a deeper problem.
Genuity Capital Markets Inc. At the same time, credit-rating agencies and investors worried that Manulife still hadn't hedged most of its stock portfolio to avoid the risk of more capital troubles. Clearly, Mr. Guloien's challenge is weighing the interests of his various stakeholders -- policyholders, shareholders, debt holders and the requirements of the regulators. In part, his early initiatives illustrate some of the difficult decisions many financial services executives have been forced to make in the post-meltdown environment.
Guloien said during his interview with the Post. Guloien described it as "excellent. On the topics of the regulator's increased intervention, the above average risk rating and the unusual Deloitte audit, Mr. Guloien had this to say:. Currently, the country's financial services regulator is conducting a comprehensive review of its guaranteed annuity requirements and is considering increasing the amount of capital insurance firms are required to hold against guaranteed annuities. As a result, most industry participants expect the requirements of insurers should increase this year.
His critics say that unlike Mr. D'Alessandro, the new CEO is genuflecting to the regulator. If the CEO of the company doesn't think he has enough capital, the rating agencies will start to question it as well. Added the same source who asked not to be named: "What sane person behaves that way?
If stock markets had collapsed further, maybe yes, but they didn't. It's not possible that he couldn't have foreseen the consequences [of a dividend cut and share issue]. Eventually, Mr.
Guloien will have to take ownership of the life insurer's performance. First, the new CEO will have to convince investors -and the regulators -- to put the past behind them. Segregated funds are insurance variable annuity contracts. Like mutual funds, investors pool their money with others to share gains on professionally managed diversified investments.
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These include equity, bond, balanced and money market funds. In either case, the contract holder or beneficiary will receive the greater of the guarantee or the investment's current market value. The term "segregated" refers to the fact that investments are separated from the general assets of the insurance company. While seg funds typically mirror the performance of corresponding mutual funds, higher fees have a negative impact on returns. The better the associated guarantee, the higher the cost or management expense ratio MER. In some cases, holders can lock-in or reset the protection on the principal when the policy has increased in value.
This option also typically comes with a higher cost. Resets are available either twice a year or on the policy anniversary date. Often referred to as "mutual funds with an insurance policy wrapper," seg funds are only sold by licensed insurance representatives. Unlike mutual funds, they also offer a death benefit, maturity and reset guarantees. Seg funds provide the opportunity to bypass probate and may offer creditor and insurer insolvency protection. Your account has been reactivated.
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