Manulife Insurance headquarters in Toronto on Sept. 27, 2017.Christopher Katsarov/The Globe and Mail
A court in the Canadian province of Saskatchewan on Thursday reserved its decision on whether claims by a hedge fund against insurer Manulife Financial Corp should be dismissed following a change of rules in the province.
Manulife has been fighting the case, brought by Mosten Investment LP two years ago, in which the hedge fund claimed the right to put unlimited funds into an old universal life insurance policy which is attached to a side account that pays out at least 4 per cent a year on excess funds.
The policies were sold more than two decades ago, when interest rates were at much higher levels than they are today.
Manulife asked for the case to be dismissed after Saskatchewan said in October that it would limit the amount of money investors could put into the policies. The company said at that time that it believed the new regulations would more quickly resolve the case in its favour.
Mosten argued that the new rules should not be applied retrospectively.
The presiding judge Justice Brian Scherman on Thursday thanked both parties for their “helpful submissions” but did not set a date to pass judgment.
Shares in Manulife have recovered more than half their losses since falling by 20 per cent last October after research firm Muddy Waters said it had taken a short position on the stock, citing the court case.
If side accounts are used as investment vehicles, insurers could potentially be exposed to unlimited liability and become insolvent, according to an affidavit filed with the court by a partner with management consultants Oliver Wyman, hired by Manulife to provide evidence.
Earlier on Thursday, Manulife’s chief executive Roy Gori said the company was “highly confident” of winning the case brought against it by Mosten.
“I’m not going to speculate on what the judge is going to say, but we’re highly confident about the position that we have and that we’re ultimately going to prevail in this matter,” Gori said on a conference call.
He said was not sure when a decision would be rendered.
Manulife on Wednesday reported third-quarter earnings that were in line with market expectations, benefiting from strong growth in Asia. Its shares were up 2 per cent in afternoon trading.