Manulife Financial (NYSE:MFC) has increased its real estate holdings in North America as it bought three office properties in New Jersey, California and Canada for about $555 million. The company bought a 30-story tower in Jersey City for $285 million, a four-building complex in Toronto for $156 million and a four-building complex in San Diego, for $109 million. ((Manulife Buys Three North American Properties for $555 Million, Bloomberg, Dec 21, 2011)) A year ago, Manulife purchased a 415-unit multifamily complex, Plaza Square, in New Brunswick for $112.5 million.  Manulife is a leading Canada-based financial services group that has operations in 21 countries around the world. It competes with MetLife (NYSE:MET), AIG (NYSE:AIG), Prudential Financial(NYSE:PRU) and Hartford Financial (NYSE:HIG).
We have a price estimate of $13.56 on Manulife’s stock, about 30% above its current market price.
Insurance companies such as Manulife are facing declining returns on their fixed maturity securities after the Fed revealed its $400 billion ‘Operation Twist’ program which caused a sharp decline in the yield on 10-year Treasury bonds. As such, insurance companies are searching for higher yields that they may find on other assets. Office towers in major coastal cities are turning out to be high-quality real estate investments amid increasing tenant demand. We expect more insurance companies to increase their investments in alternate sectors, such as real estate, during the period of low interest rates.Notes: