Analysts shoot holes in rumored Lincoln-Manulife deal

It's been an eventful few days for Manulife Financial Corp. On Friday, reports began circulating 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 the Toronto-based Manulife had offered to buy Lincoln for $32 per share. Manulife didn't exactly douse the acquisition rumors when it indicated Monday in a 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-LNC pairing makes little sense. Certainly, LNC'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 the company would not 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. Earlier this 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. The agency 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, was not immediately returned. Mr. Mendonca said he didn't expect the $4 billion in capital that Manulife's is raising will be used to purchase Lincoln. In the document filed with the SEC, Manulife says the funds will go toward “general corporate purposes.” Though 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.”