TORONTO (Reuters) - Manulife Financial Corp says it sees many attractive acquisition opportunities but suggested the price offered by Prudential to buy American International Group’s Asian life insurance arm is too high.
Donald Guloien, chief executive of Manulife, North America’s largest life insurer, said on Tuesday the company would be disciplined in its approach to making deals even though it has now achieved “fortress” capital levels.
Guloien said there were still plenty of troubled assets that needed to find their way to market, but he warned deals would be few if the $35.5 billion price of the Prudential/AIA deal, which represents 1.7 times embedded value, was considered the new benchmark valuation.
“I‘m not going to criticize the deal, but let’s just agree, that it’s a very full price,” Guloien told analysts and investors at National Bank’s Canadian Financial Services Conference in Montreal.
“I‘m not sure everybody is going to take that as a benchmark price. Suffice it to say there’s still enough assets out there that have problematic underpinnings because they are supported directly or indirectly by government support, that have to find a way to market,” he said.
“We’ve seen attractive opportunities and I expect to see more. But I do agree that if that sets the high water mark and everybody says ‘I need to see 1.7 times embedded value before I sell something,’ there won’t be a lot of M&A transactions.”
Guloien also said Manulife was not threatened by the Prudential/AIA deal, the largest ever in the insurance industry, because Manulife has already competed well against AIA and Prudential would be constrained by the takeover.
“I would think that with the leverage inherent in that deal ... they will have to be very financially disciplined going forward. That gives me a great deal of comfort,” he said.
Reporting by Andrea Hopkins; editing by Peter Galloway