We were amiss in showing a new blog for Sunlife and not Manulife yesterday. We were reminded of that by the annual report that came out today. So here it is;

We have referred to this company as the canary in the coal mine. A better name would have been the turkey in the QE mine field. Unlike SLF this stock never really made it any higher than the point it reached less than a year after the “great recession”. Most “financials” went up quite a bit more, some went well beyond the 2007 highs.

These guys are very meticulous, just take a look at their lawn on Bloor street. They are also hugely inefficient, just look at the treasurer’s office in the relatively new building in the back. It is – or at least was – the size of a small football field, the largest I have ever seen for a Treasurer/CFO whatever.

The years results were OK were it not for that small and irritating item about energy;

• Reported investment-related experience charges of $361 million in 4Q15 and $530 million in 2015. The investment-related experience charges were driven by fair value adjustments to our oil and gas investments, which amounted to $250 million in 4Q15 and $876 million in 2015. In addition, updates to cash flows used in actuarial modelling and future tax impacts also contributed to investment-related experience charges in 4Q15.

We are not sure how they managed to lose so much. Isn’t that what mutual funds and etf’s are for?? Your client loses but not you. These guys are big in Asia, in fact that is where most of their growth comes from. If we were anticipating some sort of black swan, we would have thought that it would be coming from that direction rather than oil. May happen yet.

The stock is down more than 11% (in US$ terms) today with a C$15 handle. For full disclosure, I once worked for this company.

From this May 28 2012 chart a different count could be inferred. That is 5 down followed by and a-b-c up, that may or may not be complete, and now another 5 down. This is highly improbable given the action in other financial stocks.

Manulife has been an excellent barometer for the Canadian market. It is now about a single dollar away from an earlier low as well as the lows during the depths of the Great Recession. The lows back in 2000 were about $8. The stock can trade between $10 and $8 if there is a throw-over as it completes what might be a “diagonal”. Something will have to happen otherwise this stock is in very big trouble!

In the Canadian Financial Planner the following comment was made with regard to Manulife,s “Income Plus” product that came to market in 2006;

In real life the supposed waste of time became a huge headache for Manulife that believed in this concept. A little chart of the TSE makes this abundantly clear.

Clearly in 2009 we spent sometime during which this 10-year time horizon assumption did not work out, and now again we are close. Even though the 10-year period has not yet passed for any of this Income Plus product as it was only launched in 2006, it is not looking too good. We are now going into the 6th year and virtually all that was underwritten for this product is at break even at best, so most is underwater. Last year Manulife “hedged” part (1/3?) of this exposure while it was underwater. The problem with hedging at that point in time is that it is almost the equivalent of taking the loss.

In any case this hedging got the analysts all excited, one in particular I understand at RBC, that led him to get bullish and rate the stock an outperform in the spring of this year when  MFC was trading at about $19. Today, miraculously, with the stock at a little over $10, the analyst has this eureka moment and changes his mind right out of the blue and now has an underperform rating on the stock (and all other lifeco’s). Did your broker call?

We have referred to this stock as the canary in the coalmine and recommended selling it early this year. Today it looks like a buy for a trade. After that this stock is toast if the market goes down further.