Manulife Financial Offers Debentures Worth C$750 Million

Manulife Financial Corporation (NYSE:MFC) has offered $588.5 million (C$750 million) of 3.049% fixed or floating subordinated debentures that are scheduled to mature on Aug 20, 2029. The offering is anticipated to be completed by Aug 18, 2017.

The debentures will bear a fixed interest rate of 3.0% till Aug 20, 2024 and thereafter a rate of 1.1% for the three months at Canadian dollar offer rate.

Manulife Financial might redeem the debentures wholly or partly on or after Aug 20, 2024 at par value along with accrued interest till the date of redemption.

The company plans to use the proceeds for redemption of Manulife’s 7.8% medium term notes, scheduled to mature on Oct 6, 2017 and due on Apr 8, 2019. The remaining part of the proceeds will be used for general corporate purposes.

Though interest rates have been raised thrice by Fed since December 2016, it is still at very low levels. The company is trying to reduce its interest burden by raising debt in a low interest rate environment. This will lead to a relatively low interest charge, thereby facilitating margin expansion.

Also, the company’s strong capital position will enable it to service its debt uninterruptedly and therefore maintain its creditworthiness.

As of Jun 30, 2017, the company had long-term debt of $4.3 billion (C$5.5 billion), up 3.6% year over year.

The debt-to-equity ratio was 12.8% as of Jun 30, 2017 compared with 12.9% as of Jun 30, 2016. Following the issuance of these debentures, debt to equity ratio will increase to 14.6%, which represents a 198 basis points increase.

Zacks Rank and Share Price Movement

Manulife Financial carries a Zacks Rank #2 (Buy). Shares of Manulife Financial Corporation have outperformed the industry in a year’s time. While the stock has returned 48.2%, the industry has registered an increase of 35.3%. Core earnings growth and higher insurance sales might drive the stock higher in the near future.

Other Stocks to Consider

Stocks from the insurance industry worth considering include Reinsurance Group America (NYSE:RGA) , Sun life Financial (TO:SLF) and Torchmark Corporation (NYSE:TMK) . Each of these stocks holds a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

Reinsurance Group America engages in reinsurance business. It provides a wide range of insurance products such as whole life, group life, critical illness, disability and other financial reinsurance products to United States, Latin America, Canada, East Africa and Asia Pacific. The company delivered a positive surprise in three of the last four quarters, with an average beat of 4.7%.

Sun Life Financial offers life, wealth, critical illness and other health insurance products. It also provides mutual funds, annuities and other investment products. The company delivered a positive surprise in three out of the last four quarters with an average beat of 10.5%.

Torchmark Corporation and its subsidiaries provide various life and health insurance products in the United States, Canada and New Zealand. The company delivered a positive surprise in each of the last four quarters, with an average beat of 2.2%.

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