1. Passion under pressure
It was the year that everyone's accounting was suspect. Manulife Financial Corp. was sideswiped in late August, when Merrill Lynch & Co. insurance analyst Brad Smith questioned the company's reserves against losses on bonds of troubled telecommunications companies. He put a "sell" recommendation on Manulife's shares, and the price dipped.
Manulife CEO Dominic D'Alessandro, who can't help but take things personally, fired back. "I'm a pretty emotional guy," he says. "I do most things with passion." He convened two exhaustive presentations for investors and analysts in September, disclosing much more financial information than is customary or legally required. Much of it was details on "source of earnings," including the value of in-force policies, "provisions for adverse deviation," that sort of thing.
Listeners were taken aback by the emotion as well as the level of detail. Smith didn't change his recommendation, but Manulife's share price bounced back. D'Alessandro admits he may have got a little too wound up. "The way it happened," he says, "you think someone my age would know better."
2. Delivering the goods-and goodies-to shareholders
The numbers speak for themselves. Since D'Alessandro took over as CEO in 1994, Manulife's annual revenues (from premiums and deposits) have climbed to $25 billion from $5.6 billion. He figures he can double the size of the company in five years.
In September, 1999, Manulife demutualized, converting itself from a company owned by its policyholders to one owned by shareholders. The share price has doubled, climbing from $18 a share to nearly $36 in early November.
It's even more remarkable given that many people on Bay Street said D'Alessandro took Manulife public at too high a price, making future gains more difficult. "I got criticized up and down royally by the Street," he says. "Not one of them would think of having the wit to say, 'Well, wait a minute. That's his job-to get the best possible price for the selling shareholders.'"
Going public also opened up Manulife to the now-frenzied scrutiny of quarterly earnings. In a business with products that last 40 years, that's frustrating. "I'm not going to buy this on Monday, put it on the shelf on Tuesday, sell it on Wednesday and get the cash and go to the bank," says D'Alessandro.
For the first three quarters of this year, Manulife's profit totalled $1 billion, up 20% from the first nine months of 2001. Manulife also increased its quarterly dividend by four cents a share to 18 cents. Was that an attempt to boost the stock price? Maybe squeeze some short sellers?
D'Alessandro insists it's part of a long-term strategy. "We have a policy of paying out 20% to 30% of earnings [as dividends]and we were paying out less than that." Enough said-at least until next quarter.
3.The Integrity Thing
In this year's parade of scandals, you couldn't help but notice how many disgraced CEOs were greedy and immoral both on and off the job. Not
D'Alessandro. The straight-arrow son of Italian immigrants, he grew up in Montreal's working-class Little Burgundy neighbourhood. "You read all these stories about a CEO splitting up with his third wife and they're arguing over whether she should get $15 million or $30 million," he says. "How can people consume all of this wealth? They have been so corrupted by the outsized rewards available." But that's no excuse. "If you have such a messy personal life, what are the chances you'll lead a tidy professional life?" he asks. "I think there's a right way to live your life and a wrong way." He and his wife, Pearl, celebrated their 35th wedding anniversary last month. They have three children: Anthony, 33, Michael, 28, and Katherine, 20.
In October, Manulife tied with TransAlta Corp. at the top of a Globe and Mail ranking of corporate disclosure and governance practices at 270 Canadian companies. Manulife has split the jobs of chairman and CEO, and was lauded for the number and effectiveness of its outside directors. "We take these things very, very seriously," he says. Are there bottom-line rewards to playing clean? It's hard to measure. But as D'Alessandro points out, "I can look at myself in the mirror every morning."
4. Indonesia, China and the Big Picture
Manulife continued its push into Asia this year. Some of the risks of that strategy became apparent in June, when a commerical court in Jakarta declared Manulife's Indonesian subsidiary bankrupt and shut it down. D'Alessandro insisted that the company was a victim of a "public mugging" by corrupt judges. In July, the Supreme Court of Indonesia overturned the decision.
"I think we sort of repelled the forces of darkness that were wanting to overwhelm us," says D'Alessandro. "I think our company contributed to reform in the judicial system." Indonesia has the world's fourth-largest population, but are the rewards worth the risk? "If the view is you can't venture into any country or any part of the world that's different or presents more of a challenge, you're not going to do very much, quite frankly."
Manulife already does more than 70% of its business outside Canada, and D'Alessandro has high hopes for China. The company began operating in Asia in 1897, but had to shut down many of its operations during the Second World War. In 1996, it was the second foreign life insurer to enter mainland China (after giant American International Group Inc.)-in large part because of repeated requests from Jean Chrétien and the federal government. So far, business has been negligible. "But someone would have said that about Hong Kong 50 years ago," says D'Alessandro. "They would have said, 'What are you doing there? It's a wasted effort.'"
In 2001, Hong Kong, which has fewer than 7.3 million people, accounted for $188 million of Manulife's $1.2-billion profit.
5. It's not just what he's bought, but what he's sold
Like other CEOs, D'Alessandro has made headlines with acquisitions. In 1994, he bought bankrupt Confederation Life's Canadian group life and health insurance business. This past March, Manulife bought the Canadian life insurance operations of Switzerland's Zurich Financial Services Group for an undisclosed sum.
But some analysts say you should pay more attention to what D'Alessandro has sold, or chosen not to buy. In 1995, he sold Manulife's U.K. operations, which were unprofitable. In 1997, he walked away from a bitterly contested takeover battle for mutual fund company Altamira Management Ltd., dropping a $32-a-share bid and letting TA Associates of Boston pay $38 a share for control. Altamira's fortunes have since sagged badly.
In the old days, insurance CEOs were often top salesmen who had little understanding of the technicalities of the business. D'Alessandro is a chartered accountant, a numbers specialist who climbed through the ranks of the Royal Bank in his 30s and became its youngest executive vice-president to that date at age 39. He knows how to dissect the capital on an insurance company's balance sheet and tell you how much each portion should be earning.
This past February, D'Alessandro pulled out of the bidding for Clarica Life, letting Sun Life take control of the company for $6.9 billion. "We're very conscious of what things are worth," he says. "Something worth X dollars to you may be worth a different value to me."
6. Politics 101
D'Alessandro may not be the most well-known Liberal supporter in the country, but he's one of the most influential. He's the kind of fellow you'd want to consult on both insurance and banking legislation. And so much of that legislation has gone the insurance industry's way in recent years.
Federal takeover protection for life insurers that went public in 1999 expired this past Jan. 1-except for Manulife and Sun Life. They both have a stock market value greater than $5 billion, and Ottawa says they must remain widely held. Also, while banks can own life insurance subsidiaries, they still aren't allowed to sell policies in their branches.
There aren't many Liberals left who are close to both Paul Martin and Jean Chrétien, but D'Alessandro is one of them. He's trilingual-English, French, Italian-and one of the few executives who can speak French to Chrétien at the back of the plane on those long Team Canada trade mission flights to Asia.
D'Alessandro says that his connections have "helped with introductions, and things like that. But they're not doing any more than they would for any other Canadian company."
But Manulife isn't a typical Canadian company. And Dominic D'Alessandro isn't like any other Canadian chief executive.