From Dom to Don

How’s my old friend Manulife doing 18 months after Donald Guloien replaced Dominic D’Alessandro as CEO? The first thing to say is that Guloien finally seems to be coming into his own. Share price has firmed up at $15, the annual investors day last week when analysts hear from senior officers went well, and the problem of hedging variable annuities seems solved – as long as equity markets don’t go into the toilet again.

Manulife badly needs this newfound stability. Share price tumbled from $40 two years years ago to $9, rose briefly to $26, fell again to $12 and now seems settled in the mid-teens. For shareholders, who for years enjoyed double-digit annual returns, this recent ride has been scary.

D’Alessandro, who was the focus of my book on Manulife published in 2009, has been blamed for the disruption because he did not insulate the company against falling equity markets. His explanation is simple: (1) who could have predicted the severity of the global crisis and (2) if insurance companies can’t invest in equities for the long haul, who can?

Unlike some successors to a corporate throne, Guloien has not bad-mouthed the ancien regime for the current situation. He has simply set out to correct it. In addition to cutting the dividend and hedging, he has also launched a multi-million dollar promotional campaign.

Moreover, the board of directors is now travelling again, most recently to Beijing, on a trip that had been postponed to save money during the down days. The event generated a positive piece in the Globe last Saturday although one unnamed analyst claimed that by the time China made any contribution to the company’s profits the analyst would be playing bingo and wearing a bib.

Meanwhile, by all reports the new boss of Manulife is having fun in his role. That’s always a good sign.