Mo' Manulife

I promised that I would share more of my thoughts about Manulife so here they are:

1. "we assumed more risk than our competitors" - that is fine, but I hope you can justify why
2. "There were more features in these products—I think they probably weren't charged adequate fees for the optionality embedded in them" - are you kidding me? You created a product and are finding out that you did not charge sufficiently? Is that why we find #3:
3. "they were somewhat difficult to hedge, although we've had very limited hedging, virtually none in that period" - what you mean is that you did not hedge...at all.

Now if I were a shareholder I would throw a shoe at Rubenovitch. You are an insurance company - not a leveraged stock market trade! What were you thinking?? And the non-hedging - was it because you looked at the market and found that the cost of puts were too high relative to what you were charging? Wouldn't that be a dead giveaway that you were not charging the right amount?

It is one thing, in my opinion to approach life contingencies with an actuarial mindset: historically mortality has been at this level then project changes when new info on life expectancy or new diseases emerge. It is a completely different animal to use history as a projection on the future of capital markets. Shame on you, Manulife.