John Hancock could regain its independence after being owned by Manulife Financial Corp. for 13 years.
The Wall Street Journal, citing anonymous sources, reported Thursday that Manulife is exploring an initial public offering or spinoff of its Boston-based John Hancock group. The backdrop: Life insurers in general are struggling with low interest rates, which dampen investment profits, and rivals such as MetLife and AXA have already moved to shed life insurance operations.
Manulife, based in Toronto, acquired John Hancock in 2004 for more than $10 billion to boost its US expansion. As a result, John Hancock relocated its headquarters from the Back Bay to a then-new building that Manulife had been developing to house its Boston operations. The move to Congress Street made John Hancock a key early anchor in the redevelopment of the South Boston waterfront.
The Wall Street Journal said Manulife executives have publicly discussed divesting some parts of John Hancock, including long-term care insurance. John Hancock decided last year to stop selling new individual long-term care policies, which help pay for home care or nursing home stays.
David Barbash, managing partner at Boston law firm Posternak Blankstein & Lund, said it’s likely Manulife tried to sell all or part of John Hancock but couldn’t find a buyer willing to pay the right price.
“This is another way of shedding a business unit that they don’t believe adds as much value as they hoped,” said Barbash, who specializes in corporate law. “Probably, it’s not performing the way they had all anticipated.”
Representatives for Manulife and John Hancock declined to comment about the Journal report, saying it’s against corporate policy to comment on market rumors or speculation.
But a recent leadership shake-up hinted at broader changes under way. Craig Bromley, who had been running John Hancock since 2012, abruptly left in May. At the time, Manulife offered few details about Bromley’s departure. Michael Doughty was appointed to run John Hancock on an interim basis.
John Hancock essentially acts as Manulife’s US brand name, and offers a variety of investment, retirement, and insurance products. Manulife, in its 2016 annual report, said it has about 6,700 US employees and its US division reported revenue of $15.5 billion for the year.
Brett Horn, a senior equity analyst with Morningstar, said Manulife’s performance has trailed those of its two big Canadian rivals, Great-West and Sun Life.
“I think John Hancock has been a part of that — it’s not been a good unit for them,” Horn said. “There’s been some pressure to get returns in line with their peers. To the extent they feel that carving this off is going to help returns, that seems like the obvious rationale.”
If a spinoff occurs, it’s unclear what that would mean for John Hancock’s plans to build a 26-story office building on Stuart Street in the Back Bay. At the time of the project’s announcement two years ago, John Hancock and Manulife employed about 2,200 people in the Back Bay, 1,100 at the Seaport headquarters, and roughly 500 in other local offices.
The spinoff could have a potential upside for the city: Boston would gain another major public company. John Hancock remains involved in the community under Manulife’s ownership — it’s the biggest sponsor of the Boston Marathon, for example. But independence could boost that involvement, including through more jobs or charitable contributions.
“John Hancock is a great brand with local roots and an important contributor to the state’s business and philanthropic community,” JD Chesloff, executive director of the Massachusetts Business Roundtable, said in an e-mail. “Having locally headquartered companies not only has an economic benefit but also an important psychological impact on the region.”Jon Chesto can be reached at email@example.com. Follow him on Twitter @jonchesto.