Manulife Gori Forced into Retirement Before Request
Manulife Financial Corp.’s Chief Executive Roy Gori Surprises Investors with Early Retirement Announcement
Roy Gori: The Right Time to Leave?
In a surprise move, Manulife Financial Corp.’s chief executive Roy Gori announced his early retirement this week. According to an interview on Thursday, Gori revealed that he never wanted to stay in the job so long that people started wondering why he just wouldn’t leave. The 56-year-old Australian-born executive has led the Toronto-based insurer and asset manager since 2017.
Inspiration from a Cricket Legend
Gori drew inspiration from the famous Indian cricketer Vijay Merchant, who once said, ‘Retire when they ask you, Why?, not Why not?’ Gori humbly hoped that more people would be asking ‘Why?’ about his retirement. The conditions were right for him to step down, as Manulife has a strong successor lined up to take over in May – Phil Witherington, 47, currently head of the Asia division.
A Strong Successor and Great Business Momentum
According to Gori, the firm has ‘great business momentum,’ in part from a series of deals to de-risk its balance sheet. Manulife just signed a third such accord in the span of less than a year, with Reinsurance Group of America agreeing to reinsure $5.4 billion of reserves. This transaction will allow Manulife to release $800 million in capital, which it plans to return to shareholders through buybacks.
De-risking Deals and Capital Release
Gori highlighted the significance of these deals, stating that when combined, they total $24 billion worth of reinsured reserves. As a result, Manulife cut its long-term care reserves by about 20 per cent, freed up about $3 billion in capital, and improved its return on equity.
Reinsurance Deals and Profitability
While reinsurance deals lead to lower core earnings, as the insurer no longer books revenue from the policies, offloading assets with a low return on equity improves overall profitability and reduces the amount of capital Manulife must hold under regulatory rules. This strategy has boosted the firm’s stock, with shares gaining 1.4 per cent to $45.66 on Thursday.
Analyst Reaction
Scotiabank analyst Meny Grauman wrote in a report that the follow-on transaction was well-telegraphed but still had lingering doubts about management’s ability to get it done. However, the successful completion of the deal, particularly with a younger cohort of long-term care reserves, will drive Manulife’s valuation higher and validate the bullish thesis on this name.
A New Era for Manulife
Gori’s early retirement marks the beginning of a new era for Manulife Financial Corp. As Phil Witherington takes over as CEO in May, investors and analysts will be closely monitoring the firm’s performance under its new leadership. Will Manulife continue to thrive, or will there be challenges ahead? Only time will tell.
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Manulife’s Gori seized retirement before anyone asked him to go
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