MFC Japan exposure is below peers
Manulife shares up today. Its exposure to Japan is lower then its American peers. FTN holds NO other insurance companies or stocks that would be adversely effected by the crisis in Japan. GREAT buying opportunity with a >14% yield. Buy Low Sell in Retirement!
Manulife Financial* (MFC : TSX : $16.14), Net Change: 0.12, % Change: 0.75%, Volume: 10,728,803
Rolling with the Japanese markets? On Monday, MFC said it does not expect the property and casualty reinsurance claims related to the megaquake and tsunami in Japan to exceed $150 million after-tax, and, as such, this is not expected to be material to the company's full-year results. Investors, however, seem more interested in MFC's equity market sensitivity in Japan – given the decline in the TOPIX over the past several days and the company's local Variable Annuity (VA) exposure. According to Credit Suisse, MFC's Japan equity market sensitivity is substantial and, they believe, mostly unhedged. 40% of MFC's VA net amount at risk, is in Japan. Based primarily on the 15% decline in the TOPIX so far during Q1/11, Credit Suisse estimates MFC could record $424-million reserve increase related to equity markets. Longer term, a sustained low level of the TOPIX puts into doubt the availability of $500 million of projected excess capital in the Japan segment (a figure disclosed at MFC's Investor Day). MFC's Japan exposure, at ~15% of core earnings, may translate into negative sentiment towards the stock, at least in the near-term. The stock has lost $2.4 billion of market value since last Friday's close, which is pricing in significantly more than
the $1.1 billion of potential earnings/capital impact Credit Suisse has estimated.
Since last Friday’s close, MFC's U.S.-listed shares are down 8.7%. Comparing to MFC’s Japan-focused peers:
Aflac (AFL) down 8.78%
Hartford Financial Services (HIG) off 10.3%
Metlife (MET) off 7.8%
Prudential Financial (PRU) down 7.5%.
MFC's decline is roughly in-line, on average, to most of its peers of which derive a much greater proportion of earnings from Japan.