Question-and-Answer Session
Operator
Thank you. We will now take questions from the telephone line. (Operator Instructions) Your first question comes from Colin Devine from Citigroup.
Colin Devine – Citigroup
Good morning. I have several questions. I guess, Dominic, looking at the jump here from Slide 3 with the required capital of 19% in a single quarter, frankly on page 9 of 139%. What does this say about the quality in the [inaudible] program should... Are we at the time where this thing needs to be substantially more hedged where you can handle this kind of volatility? That’s the first question. The second question on the use of reinsurance, are you considering the use of surplus release as number two, and third, if you can comment on the stability of Manulife’s dividend please.
Dominic D'Alessandro
Okay, with regard to the increase in the required capital of $1.5 billion dollars, I guess that I would say, I’d call on that, markets have moved very, very dramatically since the end of the second quarter and given the size of our business and the size of our equity exposures, I’m not surprised that there’s been an increase in the required capital. With specific reference to your question about can you hedge all of this away or is this the time to start hedging all of it away, we’re going to do more hedging but the volatility and the cost of using hedging is very, very high. At this time we’d like to exhaust other avenues. I don’t think it’s realistic to expect that we would be able to go and hedge away all of our exposure in a very short time frame, and I don’t think it’s the right use of our resources. We are looking at the use of reinsurance for purposes of providing us additional capital relief should that become necessary. There are blocks of business in our company that would lend themselves to that. These are being explored in the event that they become necessary. Finally with regard to the dividend, we have no plans to reduce the dividend. Our capital is at, even after the market fall off which was very substantial, is at $183. We think that there are other steps that we could take in the fourth quarter should the market should deteriorate or not show improvement. We’ll judge that as we go along. The dividend cut is not something we’re contemplating.
- To read the full transcript on Seeking Alpha, click here »
