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Heightened regulatory scrutiny of deals where insurers offload some of their risk to private equity-owned companies is “welcome” to ensure the transactions do not create problems for the industry, the outgoing chief executive of insurer and wealth adviser Manulife has said.
Roy Gori has been a leader in de-risking deals, including a C$13bn (US$9.3bn) deal with KKR-owned Global Atlantic. He said he expects more transactions to follow as private equity-backed groups find ways to extract more profit from managing reserves than traditional life insurers do.
Private capital groups have hoovered up insurers and reinsurers since the 2008 financial crisis, and then bought or reinsured the back books of traditional companies. Global regulators have warned of liquidity and credit risks, as well as potential conflicts of interests from investments connected to the insurers’ backers.
“Not all private equity funds are created equal and not all reinsurance transactions are equal,” Gori said. “We actually welcome greater scrutiny because . . . it helps the entire industry not run foul or have problems where people aren’t able to discern which are the good reinsurance transactions versus which are the bad ones.”
Gori, 55, spoke to the Financial Times as he announced he plans to retire in May after more than seven years at the helm of the Toronto-based group. He will be replaced by Phil Witherington, currently president and head of the company’s large Asia business. Manulife, which owns John Hancock in the US, offers life and long-term care insurance as well financial advice and investment products.
Under Gori, Manulife freed up more than $11bn in capital including through de-risking deals. “We hold a very high bar to who we reinsure with . . . and we put a lot of terms into the contract such that we ensure a lot of confidence and protection,” Gori said. “Some of that may actually translate into maybe a slightly less attractive transaction but we feel that’s a really good investment.”
An Australian native, Gori joined Manulife in 2015 after spending almost three decades in Asian retail banking at Citigroup. He became the Toronto-based insurer’s chief executive in 2017.
During his tenure as CEO, Manulife’s customer base rose from 26mn to 35mn, its assets under management jumped 50 per cent to C$1.5tn while its market capitalisation went from C$52bn to C$80bn. Last year, he spearheaded the purchase of UK-based private credit manager CQS.
Gori led the rapid expansion of the group’s Asia business and cut costs. He emphasised its digital offerings, pushing up the share of transactions that do not require human intervention from 68 per cent to 88 per cent.
“Our industry has to be simpler, more customer intuitive, easier and more engaging,” he said, as he highlighted the group’s investments in digital behavioural insurance that rewards life insurance customers for taking actions to improve their health.
But Gori also warned that increased use of artificial intelligence and digital applications must be accompanied by investment in cyber security. “It requires not just an investment in the technology to actually make for better experiences, but also an investment to insure that you reduce as much as you possibly can any cyber risks . . . building operational resilience is absolutely key.”
Gori plans to stay on as an adviser until August. Witherington, the incoming CEO, worked at HSBC and AIA before joining Manulife in 2014. He served as chief financial officer for five years before his current role. “It is an honour to be provided with the opportunity to lead the next chapter,” he said in a statement.
Manulife’s Toronto shares were down 0.6 per cent in morning trading.
Additional reporting by Ian Smith in London