Manulife seen eyeing AIG assets in U.S. upheaval

Tue Sep 16, 2008 7:45pm EDT
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By Lynne Olver

TORONTO (Reuters) - Canadian life insurance company Manulife Financial Corp could be well placed to pick off some business lines from American International Group if the troubled U.S. insurer has to sell them.

Analysts say Manulife, the biggest life insurer in North America by market value, would at least consider acquiring AIG's U.S. variable annuity business, and Manulife executives have said they would like to enter the Japanese and Chinese wealth-management markets.

Manulife late on Tuesday outlined its own exposure to AIG and to Lehman Brothers Holdings, which filed for bankruptcy protection this week.

For AIG, it had fixed income investments in the holding company with a par value of $38 million, and other exposures of $9 million. It also had fixed income investments with par value of $190 million in AIG subsidiary American General, and $15 million in Sun America.

For Lehman it had fixed income investments with a par value of $383 million and derivatives exposure, net of collateral, of $12 million.

Manulife had said it expected to take a charge in the third quarter, but the amount had not been determined.

Analysts at BMO Capital Markets and Scotia Capital looked at 2007 year-end filings with U.S. insurance regulators to estimate Manulife's and Great-West Lifeco's bond exposures to embattled U.S. financial companies, but actual exposures may have changed since then.

A deal for AIG's U.S. annuity business or certain Asian businesses "would not likely be enormously accretive in the early going," but given Manulife's scale in those areas, an acquisition would likely add significantly to its earnings over the long term, Genuity Capital Markets analyst Mario Mendonca wrote in a research note.   Continued...