Manulife Financial Corp. has done business in Asia for more than a century, but never in India. Now the insurer sees the country becoming a big part of its operations in the region.
“We think that India can be an important part — and quite a significant part — of our business there” in the next 10 to 20 years, Manulife Chief Executive Officer Roy Gori, 50, said in an interview at the insurer’s Toronto headquarters.
Manulife last week announced a joint venture with India’s Mahindra & Mahindra Financial Services, a firm with more than 6 million customers and assets under management in excess of $8.5 billion. India was one of the few countries in the region the insurer had yet to enter.
Manulife’s initial investment is small: Canada’s largest life insurer agreed to invest $35 million in two Mahindra Finance units, according to a June 21 filing with India’s stock exchange. Still, Gori sees the combination of Mahindra’s local market brand with Manulife’s global capability and knowledge as a key step.
“This is just almost perfect chemistry to create a value proposition in the market that will allow us to win and ultimately create value for consumers and ultimately for our shareholders as well,” Gori said.
While Manulife hasn’t disclosed any key targets for the joint venture, Gori said India is going to figure “quite significantly” in Manulife’s plans for Asia that could extend into other products and services. “The first phase for us is all about asset management and we want to make sure that we can execute against the opportunity that we’re excited about. Beyond that, we’ll clearly be open to looking at other opportunities.”
Manulife has been in Asia since 1897, when the insurer sold its first policy in the region, in Shanghai. It now has a presence in more than a dozen Asian markets, with more than 11,000 employees and 80,000-plus contracted agents offering insurance, wealth-management products and asset-management services. Manulife’s assets under management in Asia totaled C$192.9 billion ($147 billion) as of March 31.
Manulife has used joint ventures before to expand in Asia, starting in Indonesia in 1985 with a partnership involving Dharmala Group and International Finance Corp. Manulife was part of China’s first joint-venture life-insurance company, Manulife-Sinochem, in 1996, four years after becoming the first Canadian life insurer to open an office in China. Manulife started a partnership in Japan in 1999, the same year it entered Vietnam, and it has continued its expansion to other Asian nations, including Cambodia and Myanmar.
It has not previously been in India though.
“We’ve been assessing the India opportunity for a long period of time, and quite frankly we’ve been in discussions with Mahindra for more than a year,” Gori said. “It’s a very strong consumer brand.”
India’s population — which now totals about 1.4 billion, and is forecast to surpass China’s in the next decade — is fueling “tremendous” growth in the asset-management industry, Gori said. The industry has posted a compound annual growth rate of 15% in the past 10 years.
“It’s clear that there is further growth and upside in terms of the industry and its evolution,” Gori said.
Other comments from the interview:
Gori is one year into a transformation plan for the 132-year-old insurer, with goals for 2022 that include accelerated growth in four “high potential” areas: Asia insurance; wealth and asset management; behavioral insurance (which encourages clients to lead healthier lifestyles through the use of technology) and Canada group benefits. The plan is to push those areas to about two-thirds of core earnings from about half currently.
“We’re going to be investing more resources, more capital, more expense into growing those businesses, because we see they have not only tremendous opportunity and upside, but also that they’re delivering great returns for our shareholders,” Gori said. “We’re feeling pretty good about the progress we’re making.”
– On the U.S. and its John Hancock unit:
“A third of our profitability comes from the U.S. today and Hancock has operated in the U.S. for 150-plus years,” Gori said. “It’s a very strong, well-recognized brand that’s been in the marketplace for a long period of time and for us contributes significant profitability.
“We feel that it’s a market that we have the capability to succeed in,” he said. “Our growth over the last five years demonstrates that we’ve actually been making good progress.”
– On pushing Vitality, its behavioral insurance program, in the U.S.:
“We believe that we can’t simply be complacent with the solutions that we’re offering, which is why we’ve pivoted to Vitality,” he said. “We think the industry in the U.S. has been a little bit stale. It has operated through very traditional products over a very long period of time, and the consumer needs new products to really have insurance be in their consideration set.”
– On use of capital:
“That financial flexibility that comes with reducing our leverage is something that we’re going to continue to focus on, and that is our No. 1 priority as it relates to our capital position,” he said. Debt will be repaid at renewal periods rather than being paid down early, he added.
Returning capital is the next priority: “We announced our buyback program last year and we’ve been steadily buying back our stock,” Gori said. “We’re going to continue to be looking for opportunities, because we believe our stock price today is undervalued versus its potential and certainly where we believe the value exists.”
Manulife may also consider acquisitions, though those will likely be “opportunistic” and aren’t needed for Manulife to reach its earnings growth targets. “We’re in a great position in that we don’t need that to get growth and to really achieve our aspirations from a company business perspective.”