Analysts cool to a Manulife bid for Lincoln

Reports began circulating on Aug. 27 that Manulife — John Hancock Financial Services Inc.'s parent company — was gearing up to buy Lincoln National Corp. Indeed, trading news website Benzinga reported unconfirmed rumors that Toronto-based Manulife Financial Corp. had offered to buy Lincoln for $32 per share. Manulife didn't exactly douse the acquisition rumors when it indicated in a Thursday regulatory filing that it planned to raise up to $4 billion from the sale of various securities. But analysts contacted by InvestmentNews say a Manulife-Lincoln pairing makes little sense. Certainly, Lincoln's variable annuity business would ratchet up Manulife's risk profile. “Lincoln would just add to Manulife's equity market exposure,” said Mario Mendonca, an analyst at Genuity Capital Markets. Laurie Lupton, a spokeswoman for Manulife, said that the company wouldn't comment on the rumors. Lincoln and John Hancock's pension businesses already have plenty of exposure to the equity markets, said Steven D. Schwartz, an analyst with Raymond James & Associates Inc. Boosting its exposure to the extremely volatile stock market is probably not high on Manulife's priority list at the moment. Last month, Fitch Ratings downgraded Manulife's issuer default rating to A from A+, citing its high level of earnings and capital volatility in the second quarter. Fitch also said that Manulife's variable-annuity guarantees — based in large part on gains in stock prices — were a concern. Mr. Mendonca added that the switch from U.S. to Canadian accounting standards would make Radnor, Pa.-based Lincoln's earnings look less attractive. A call to Laurel O'Brien, a spokeswoman for Lincoln, wasn't immediately returned. Mr. Mendonca said that he didn't expect the $4 billion in capital that Manulife is raising would be used to purchase Lincoln. In the document filed with the SEC, Manulife said that the funds will go toward “general corporate purposes.” Although the match between Manulife and Lincoln may be unlikely, Mr. Schwartz noted that Lincoln itself might make an attractive acquisition target. “It's at a size that can be bought,” he said. “And it has top-10 market share in just about everything you can think of.” E-mail Darla Mercado at [email protected].