Manulife faces OSC, changes CFO

By Steven Lamb | June 22, 2009 | Last updated on June 22, 2009
3 min read

Manulife Financial announced late on Friday that it had received a notice of enforcement from the Ontario Securities Commission regarding the firm’s level of disclosure on the risks posed by its variable annuity guarantee and segregated funds business.

The stock market’s precipitous decline last fall left the company with underfunded liabilities in these guaranteed products, for which the firm is now responsible. The OSC notice suggests Manulife did not, in the commission’s opinion, adequately warn shareholders of this risk under its continuous disclosure obligations.

“The company believes its disclosure satisfied applicable disclosure requirements,” Manulife said in a press release late Friday.

CEO Donald Guloien assured the investing community that Manulife remained well capitalized, saying: “If we were reporting our quarter today, we would find our consolidated MCCSR levels (Minimum Continuing Capital and Surplus Requirements) to be near the highest levels in our history.”

The company has benefited from the stock market rally that has been in place since March, but he admitted those gains would be almost entirely eaten up by actuarial reserve increases.

“Our earnings and capital levels will continue to be impacted by equity market and interest rate volatility, and we will remain focused on fortifying capital,” he said. “Given the financial turmoil of the past year, we also anticipate regulators, rating agencies and the investing public will expect higher levels of capital going forward.”

Just minutes before the OSC notice was disclosed, the firm announced the replacement of its chief financial officer, Peter Rubenovitch. Rubenovitch will be succeeded by Michael W. Bell, as senior executive vice-president and chief financial officer. Rubenovitch is heading into retirement, but will remain with Manulife to assist in the transition.

Bell has been tasked with reviewing the company’s capital plan to ensure capital levels are maintained.

“I would like to thank Peter for his outstanding commitment to Manulife’s growth and development,” said Donald Guloien, president and CEO of Manulife. “He played a key role in our demutualization, our integration with John Hancock and he has also been instrumental in all of Manulife’s capital markets activities.”

Bell joins Manulife on Monday, after a six year stint as executive vice-president and CFO at CIGNA Corporation, where he was also president of group insurance operations.

“[Bell] is a seasoned international insurance executive with an outstanding track record as a financial leader, risk manager, business and team builder,” Guloien said. “His expertise, experience and energy will be a great asset to Manulife as we continue to build the strong, reliable and forward-looking Company our customers trust with their most important financial decisions.”

Changes at Sun Life also Manulife isn’t the only major insurer to announce C-suite changes. Sun Life Financial announced on Monday that Colm Freyne would take over as interim CFO effective July 1, 2009, following the resignation of Rick McKenney.

Freyne is currently the firm’s senior vice-president and controller.

“Colm is highly qualified to lead our exceptional enterprise-wide team of finance professionals, given his three decades of international financial services experience,” said Sun Life CEO Donald Stewart. “He has been with Sun Life since 2003, having joined us from a major Canadian chartered bank. The stewardship of our finance function is in very good hands.”

McKenney is heading south of the border to become CFO at disability insurance provider Unum Group. He replaces Robert C. Greving, who announced his retirement in February.

“Rick’s leadership and commitment have helped Sun Life remain strongly capitalized and well positioned to meet the economic challenges of the times,” Stewart said. “We wish him the very best on his return to the United States.”

Despite facing similar market challenges as Manulife, Sun Life has not received an enforcement notice from the OSC over its disclosure regime, according to Steve Kee, assistant vice-president of communications at the firm.


Steven Lamb