Friday, December 30, 2011

(No.183) Christopher Hitchens: unworldly fluency

One of the pleasures in my life has been reading or listening to the words of highly articulate, thoughtful people. Disagreeing with a particular point of view need not diminish one's enjoyment of its expression.

There are people whose words I will always try to find an opportunity to read or hear. Those who are highly articulate writers are often not as fluent when it comes to verbal presentation. Among my favourite columnists is Toronto Star columnist Rick Salutin (formerly with The Globe and Mail). More articulate as a speaker than as a writer is Stephen Lewis, the former Ontario NDP leader and Canadian UN ambassador as is the English satirist and director Jonathan Miller from Beyond The Fringe.

Then there is the type far less frequently encountered: those who are as skilled verbally -- in debate, discussion or interview --as they are when writing a column or essay. In this category my longtime favourite was Malcolm Muggeridge (1903-1990), English writer, editor and television host. Another is the journalist and former editor of Harper's Magazine, the American Lewis Lapham.

My notional group among whom I regard Muggeridge and Lapham as charter members has another who figured in the news recently. On Dec. 15 of this month Christopher Hitchens died, age 62, after a life of heavy drinking and, as most obituarists seemed anxious to emphasize, even heavier smoking. He was, as was Muggeridge in his day, one of the most accomplished and controversial people in Anglo-American letters.

The views argued with ferocious energy by Hitchens were often controversial and as a polemicist he annoyed many right the way across the political spectrum. He wrote hundreds if not thousands of columns for publications as diverse as The New Statesman, The Nation, The Atlantic, Vanity Fair and Slate. He willingly appeared on American cable news, Fox as well as CNN, when they were not afraid to have him on.

From Hitchens' sharp criticism of targets such as Henry Kissinger, Mother Theresa and Diana, Princess of Wales through his support for Margaret Thatcher's Falklands War to support of the U.S. invasion of Iraq, perhaps nothing aroused his critics as much as his frontal assault on religion laid out in his bestseller "God Is Not Great".

As the years passed Hitchens became more difficult to categorize politically. He gained his early English reputation as an Oxford University Trotskyite but he became far less predictably left wing on issues, especially after he moved to the U.S. in 1981.

Nothing tested Hitchens' courage, beliefs and principles as did the esophagael cancer with which he was diagnosed while in the midst of a book tour promoting his 2010 memoir "Hitch 22". However he never wavered in his atheism nor in the forcefulness and articulateness of his writing and speaking, virtually to the end of his life.

Those who waited for and in some cases wanted to see him turn to religion during his public dying were disappointed. He declared: "Suppose I ditch the principles I have held for a lifetime in the hope of gaining favor at the last minute. I hope and trust that no serious person would be at all impressed by such a hucksterish choice."

I among many, many others will miss Christopher Hitchens. I cannot improve on what his longtime friend, the English novelist Ian McEwen, has written: "His unworldly fluency never deserted him, his commitment [to writing] was passionate, and he never deserted his trade."

by Alastair Rickard

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Tuesday, December 20, 2011

(No.182) Manulife: pigs get fat, hogs get slaughtered

In the last couple of months I have written several columns about Manulife and Sun Life and their respective performances as Canadian financial institutions. My critical comments about Manulife and its senior management in "Manulife Jabberwocky" (column No. 177, posted Nov.13, 2011 to RickardsRead.com) attracted a number of responses from the financial services community, almost all of them positive.

Just recently a Canadian college business instructor wrote to thank me "for maintaining your blog. I am sure that it seems a thankless exercise at times, but I enjoy reading it and it helps me to better understand the life insurance industry. I am quite looking forward to your comments in light of Sun's announcement of this morning [withdrawing from the sale of individual life and annuity policies in the U.S.], especially given your blog posts on Sun's U.S. business."

I have received several emails expressing similar expectations involving RickardsRead.com. I will indeed be devoting a future column (likely the next one) to comments on the changes at Sun Life since the Nov.30 retirement of CEO Don Stewart and the takeover by his successor Dean Connor. However in this column I want to share a few of the reactions I received to my comments about Manulife. [Insertions within square brackets are mine.]

A securities analyst in Toronto thought my Manulife comments were "Well said!! Let's not forget where was the central regulator [OSFI] as all of this was going on? Oh ... and if some Canadian life insurers want U.S. GAAP [I] wonder how they would feel about a U.S. P/B valuation on their shares? GAAP may have many shortcomings but markets are not that inefficient and know how to look through the weakness as the much lower valuations of some U.S. insurers can attest. ... Always enjoy your column."

This rocket came from a person associated with one of the big five Canadian banks: "Thank you -- and keep up the good work!! Bunch of goddamn [deleted] and the financial press says nothing. It was interesting to note that Berkshire [Hathaway] announced a ton of losses on derivatives on the same day that the Manulife [deleted] told us how they plan to make so much money on CDSs -- because they are 'experts' at credit?"

A life insurance broker connected with Manulife emailed to say that "I read your blog on a regular basis, and ... you are spot on with Manulife. The bloom is certainly off that rose. As a distributor for Manulife and several other insurers it has always been a puzzle as to why they consistently do what so many other manufacturers won't. I will say however from a retail perspective Manulife has done an excellent job building its brand in spite of itself. Anyway, the saying 'pigs get fat and hogs get slaughtered' fits the Manulife scenario. Insurers have always had the keys to the financial treasure chest,why is it that they must always try to blow themselves up?"

Another response to my Manulife column came from an American university professor of insurance who wrote to tell me that "you've done it again! I laughed out loud -- something that doesn't happen so often these days. Keep after 'em!"

A former senior executive at a major Canadian life insurance company also thought my Manulife comments were "well said!. Yours is at times a lonely voice as much of the financial media in Canada acts as a cheering section for the press releases of the likes of Manulife. They continue to be the darling of the analysts largely because they are the loudest of the voices at the table and have defined how to read the tea leaves."

On the other side of the matter an opinion from someone at Manulife posited that "someday the market will stop looking in the rear view mirror and start looking where Manulife is going. Interest rate sensitivity is 90% hedged, equity risk is 60% hedged. MCCSR was 241 last quarter .... I'm higher on Manulife than I have ever been and while I don't expect a great quarter, I think given the market it won't be too bad."

And finally on the subject of my comparison of Manulife with Sun Life, this flattering but hyperbolic comment from a former regulator: "Al, you have outdone yourself. Move over Conrad Black."

by Alastair Rickard

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Sunday, December 11, 2011

(No.181) "The Sisters Brothers" & other reading

Many if not most regular readers of fiction have favourite authors. Some write novels featuring a continuing character who strikes a chord with the reader. I am certainly one among such readers.

In the last month or two I have been the beneficiary of many hours of reading pleasure provided by the recent novels of several of my favourite writers plus a couple of newcomers to my bookshelf. In this column I share references to several of these novels, all of which are recently published; some are not yet available in paperback. I enjoyed them all in varying degrees and I recommend them all.

Ian Rankin, "The Impossible Dead".
In the crime/police genre my longtime favourite fictional character is the now retired Scottish Detective Inspector John Rebus of the Border And Lothian (Edinburgh) police. He is the superb creation through numerous novels of Ian Rankin, a Scot who has now written a second novel featuring D.I. Malcolm Fox. He works in the Edinburgh police department referred to as "the Complaints", what in American terminology is usually called Internal Affairs -- the police who investigate the police. Fox has some similarities to Rebus but also significant differences. This Fox novel is even better than the first; a textured and multi-layered tale that suggests that the Fox novels will become as addictive as were those featuring Rebus.

Patrick DeWitt, "The Sisters Brothers".
Dewitt is a Canadian living in Oregon and this is his first novel. It has been a great success and was shortlisted for the Giller Prize and the Man Booker Prize and won both the Governor-General's Literary Award and the Writers' Trust Prize. This novel has been referred to by some critics as a "concept western", a reference that I think cloaks a fashionable unwillingness to acknowledge having enjoyed a 'western' set in mid-19th century Oregon and California. It is in fact a fascinating, well written novel that is certainly different in tone and style from what the reader may think of as a 'western' novel. Two brothers whose family name is Sisters are hired regularly as killers by an Oregon businessman. This story follows their travels on assignment down to and back from San Francisco during the California gold rush. Marvellous narrative.

T. Jefferson Parker, "The Border Lords".
For some years Parker wrote crime novels set in southern California, particularly Orange County. Generally his characters did not reappear in subsequent stories. However three novels ago he began a series featuring an L.A. Sheriff's deputy named Charlie Hood who has latterly been working along the California border with the ATF and involved with the violent world of drug cartels and cross-border smuggling of drugs and guns to and from Mexico. The Border Lords is the fourth in the Hood novels and maintains the standard of the earlier novels in the series.

Lee Child, "The Affair".
This is the latest novel in the series about the adventures of the loner Jack Reacher. What distinguishes it from its predecessors in the Reacher series is that it looks back and tells the story of how Reacher, a U.S. Army major in the military police, arrives at the point of leaving the army and beginning his aimless travels around America carrying just a toothbrush (although latterly reality has forced him to add ID and an ATM card). It is as violent and tough as any of Child's previous Reacher novels and just as absorbing. It is already a bestseller.

Peter Robinson, "Before The Poison".
Robinson, a Yorkshireman who came to Canada to pursue his graduate studies in English, is best known for more than a dozen novels set in Yorkshire featuring Inspector Alan Banks. They have been translated into 15 languages and published around the world. His latest novel, while set in Yorkshire, is not a Banks story. As its focus it has a recently widowed Englishman returned from a successful career as a Hollywood movie music composer. He buys a restored house in Yorkshire and becomes absorbed in examining a murder case involving a previous resident. The novel is both interesting and complicated.

Guy Vanderhaeghe, "A Good Man".
In my opinion A Good Man should have won the Giller Prize this year; it wasn't even short listed. It is the third novel in a trilogy set in the Canadian prairies in the late 1800s that began with The Englishman's Boy in 1996 and was followed by The Last Crossing in 2001. Much of this third novel takes place in Montana but it is as Canadian in tone and content as the first two novels. Vanderhaeghe, a Saskatchewan resident, is a superb storyteller and ranks as a fine novelist in this country or elsewhere.

John Sandford, "Bad Blood".
Sandford is the author of the "Prey" series of police novels. Bad Blood is the fourth in a newer series featuring Virgil Flowers, a detective in the state of Minnesota's special department whose members are sent to handle difficult cases in various locations in the state. Bad Blood sees Virgil sent to a small town to deal with a case that comes to involve a religious cult that practises paedophilia. The pace is brisk and there is a good deal of violence. In some ways Virgil Flowers represents an American opposite to Scotland's John Rebus.

Martin Walker, "Black Diamond".
Walker is a former journalist and author of a number of non-fiction books. Beginning in 2008 he published the first in a series of novels: Bruno, Chief of Police is the first, The Dark Vineyard is the second and Black Diamond is the third. The lead character is Captain Bruno Correges, the chief of police in a small French town in the Dordogne in the southwest of the country. There are mysteries to be solved but Bruno is up to it (his military background elevates his skill and experience well above what one might expect from a small town policeman). I have just discovered this series and it is most enjoyable reading: well written, gentler (if that word can be applied to crime stories) and more slowly paced reflecting its location. Lots of interesting information about wine and truffles and rural France today, all presented as part of a novel with a good plot.

by Alastair Rickard

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Monday, December 5, 2011

(No.180) J. Edgar Hoover, Clint Eastwood & Creepy Karpis

Recently to be found in movie theatres has been "J. Edgar", a biographical drama directed by Hollywood legend Clint Eastwood with Leonardo DiCaprio as J.Edgar Hoover. The film has received mixed reviews, perhaps to be expected when it is about a man whose self-created image as the leading American "G-man" of the last century began to crumble soon after his death at age 77 in 1972, still FBI director thanks to his secret files he used to blackmail American presidents and other politicians to keep him in office.

Whenever Hoover comes to my attention I think of an incident involving Hoover and Alvin Karpis (dubbed "Creepy Karpis" by cops and the media in the 1930s), an anecdote that Hoover ensured did not surface until many years after the incident occurred.

Karpis, who was actually a Canadian born in Montreal, became a famous American gangster in the 1930s, especially after he was elevated by the FBI to the status of "Public Enemy No.1" following the death of John Dillinger.

He was a bank and train robber who was said by the government to have killed at least 14 people. This was never proven although he was tried and convicted in Minnesota for a kidnapping for which he was given a life sentence and ended up in Alcatraz. He was captured in New Orleans by a squad of two dozen or so FBI agents at about 5 p.m. on a May 1936 afternoon. Hoover told the media that he had personally reached into Karpis' car, grabbed him and then disarmed him.

After Karpis was finally released from prison in Dec. of 1968 and then deported to Canada he related what had really happened that afternoon in 1936.

Karpis had been captured by the FBI agents and held standing beside his car. He looked over his shoulder towards a nearby street corner and saw Hoover peeking around a corner. An FBI agent called to him "Come on out boss, we got him" at which point Karpis relates that Hoover and his longtime second in command Clyde Tolson, "the gold dust twins" as Karpis referred to them in a Canadian interview (one I well remember seeing at the time), came down the street to where Karpis was being held prisoner.

Karpis ended up settling in Malaga Spain in 1973 and died there in 1979 under suspicious circumstances. He had lived modestly on the money he made from collaborating on a couple of books including his autobiography Public Enemy Number One published in 1971. He wrote it following his deportation to Canada. His second book published after his death, On The Rock (1980), was about his time in Alcatraz.

I read both these books (I think one or both have been reissued) and recommend them as no nonsense and interesting counterbalances both to Hoover's self-mythologizing and to any number of Hollywood myths involving people Karpis knew or worked with such as Ma Barker (a harmless woman shot to pieces by the FBI in 1935 and subsequently elevated to mythical status) and the 'Birdman of Alcatraz', Robert Stroud (a vicious head case).

Karpis was refused the parole he would likely have received sooner had it not been for Hoover's opposition (no mystery as to why). Karpis was incarcerated for 33 years (1933-69) and therefore was unable to say anything to the press about the phoniness of Hoover's personal crime-busting reputation.

After Karpis had been returned to Canada it was a different circumstance. Today one can read his books and also watch on YouTube excerpts from interviews done with him including his description of his capture in 1936 and Hoover's peek-a-boo part in it.

by Alastair Rickard

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Monday, November 28, 2011

(No.179) Economical Mutual & demutualization rules

In two previous columns (Nos. 159 & 166) I wrote about the demutualization of Economical Mutual Insurance, a large federally regulated property and casualty (P & C) insurance company based in Waterloo, Ontario. Its demutalization was proposed by the company board and senior management who are among the relative handful of people who hold less than 1000 voting ('ownership') policies in the company. Some of them apparently believe that the surplus/'equity' in the company can -- on demutualization -- be shared among the few to the disadvantage of the company's tens of thousands of non-voting policyholders.

This prospect was apparently such a stench in the nostrils of those who value fairness that the federal government, in the person of Finance Minister Jim Flaherty, announced at the end of June that it was launching a public consultation on what ought to be the framework for the demutualization of federal P & C insurance companies. This would be a regime that would apply to all such companies looking to demutualize, not just to Economical Mutual.

I urged those interested in the issues involved to write to the Minister of Finance. A number of people, including both insurance brokers and non-voting Economical Mutual policyholders, have since indicated to me that they have done so.

One person who made a submission needed no urging to do so. I refer to a former colleague of mine Claude Gingras, LL.L.,LL.B.,LL.M. who in my view is Canada's leading expert on the subject of insurance company demutualization. He was General Counsel for the Mutual Life of Canada from 1977 to 1995 and, thereafter, Special Advisor to Canada's Dept. of Finance until mid-2003. In this latter capacity he assisted the federal government in establishing a demutualization regime for life insurance companies that was used by the four major mutual life insurance companies (Manulife, Sun Life, Canada Life and Mutual Life of Canada) to convert to stock companies.

I agree with and endorse the points in Mr. Gingras' submission. Their cogency should make them irresistible to all but those most financially or politically self-interested in the proposed Economical Mutual Insurance demutualization.

For those who have followed this issue on www.RickardsRead.com here are key excerpts from Claude Gingras' July 28 submission to Ottawa.

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He notes that the June 30, 2011 announcement from the federal government asks: "Independent from the demutualization issue, the Government is seeking views on how mutual P & C companies can ensure that they continue to have an effective governance structure and whether measures need to be taken to increase the number of voting policyholders."

That the Department of Finance asks this question [Gingras states] and in these terms, is somewhat intriguing. The fact is that at least half of the mutual P & C companies under federal jurisdiction currently have a seriously defective governance structure that does not deserve to be "continued" at all, and this situation has been well known to the Government for a long time.

While the Insurance Companies Act (ICA) determines who has voting rights in a mutual life company, it is silent on this crucial governance matter for P & C mutual companies. Each P & C mutual is therefore free to determine to whom they will issue a voting policy. A number of mutual P & C companies have granted voting rights to all their policyholders by by-law, including for instance Wawanesa, a major company. However Economical [Mutual Insurance], another major P & C company, ... and a few smaller ones have reserved their voting policies mostly for directors, officers, staff and friends of the company, thus ensuring a very convenient and cosy entrenchment of management.

Aware of this disturbing situation, the Department of Finance put forward a proposal for legislation in its Consultation Paper of Jan. 2003 entitled "Corporate Governance of Financial Institutions" .... [It proposed] to "extend by legislation the right to vote to all policyholders of P & C mutual companies, subject to certain exclusions (e.g., policies of short duration or that fall below a certain premium value). One practical approach would be to extend the right to vote to policyholders upon purchase of a policy or renewal of an existing policy."

[Mr. Gingras then notes that] this 2003 proposal, together with others intended to protect and strengthen the rights and interests of policyholders following the massive demutualization movement that occurred in the life sector, was never implemented as the Government chose to give in to the powerful lobbies of the insurance industry ... which opposed all these measures. The industry even opposed a proposal, also abandoned, that companies be required either to consider the interests of participating policyholders in managing their participating funds or to act in a manner that is fair and equitable when managing these funds.

... I submit that the Government should implement the [2003] proposal in the ICA before even attempting to establish a P & C demutualization regime. Such a provision would not only facilitate the drafting of a P & C demutualization regime but would also ensure that the decision to demutualize is taken solely for the right reasons.

... Human nature being what it is, faced with the prospect of receiving humongous windfalls in the form of demutualization benefits and becoming instant millionaires, these [few P & C voting] policyholders may approve, or incite, demutualization without having the future well-being of their company in mind. ...

Many generations of policyholders have contributed to the accumulated surplus of their company and, ideally, should receive their share of the value of the company in the form of shares or as a portion of the proceeds of the sale of the entity on demutualization. Obviously that is not feasible and, in practice, participation in the benefits of demutualization is limited by the availability of records.

In a number of foreign jurisdictions the regulations require that all policyholders of the last 3 to 5 years be included in the payout of benefits but only the current policyholders are entitled to vote on the conversion. Benefits representing the value of the company are allocated to all these policyholders in proportion to the premiums they have paid during the whole period chosen.

This appears to be the most fair and equitable way to treat policyholders upon a P & C demutualization [emphasis added], taking into account that P & C policies are mostly short term contracts, while life insurance policies generally have much longer duration. ...

P & C companies have no participating policyholders as this expression is defined in the ICA. P & C policyholders entitled to vote carry exactly the same risk -- insolvency of the company -- as those without that right. ... Thus those voting policyholders have no greater claim to "ownership" of the company than those without voting rights. Consequently, they should not receive a greater benefit upon demutualization by virtue of their voting rights than the other policyholders [emphasis added].

Since 1997 a Canadian mutual insurance company has been allowed to issue equity instruments in the form of participating shares .... Therefore a mutual insurance company is not forced to resort to demutualization if it needs to access share capital for expansion or safety or soundness purposes.

In the information material to be provided to policyholders by a company seeking their approval of its demutualization, management should explain in detail why demutualization is sought, beyond platitudes such as "this is the right thing to do" and "the need to give the company to its rightful owners". The other options of the company beyond demutualization, including issuance of participating shares, should not only be explained to policyholders but policyholders should be told why these options have been rejected by management.

For smaller P & C mutual companies unable to effect a successful initial public offering and maintain a presence in the stock market, but wishing to demutualize, merger or sale of all the assets of the company to another entity could be the only avenue. ...

There is no doubt that the disappearance of mutual companies in the insurance sector will greatly reduce competition. Indeed, the presence of entities in which policyholders do not have to pay rent to shareholders forces stock insurers to keep premiums at a lower level than they would otherwise have set them. This was well understood in the countries that experienced a wave of demutualization in the life sector, as did Canada in the late 1990s. ....

Surely, if the current voting policyholders of the company [i.e., Economical Mutual] that first announces its intention to demutualize are allowed by Ottawa to become instant millionaires for no valid reason, the pressure will be great for the other P & C mutuals, where also only a small minority of policyholders have the right to vote, to follow suit.

The P & C sector in Canada is already dominated by foreign companies. It is reasonable to assume that most Canadian P & C demutualized companies would then pass into foreign hands. This would further reduce the market share of the Canadian companies in the P & C sector.... [and] the responsibility of the federal government [is] to ensure that demutualization does not occur mainly for the unjust enrichment of few policyholders.

Let's hope that Ottawa will find the courage to resist the pressure and establish a P & C demutualization regime that will be fair and equitable to all policyholders and that would not permit demutualization for the wrong reasons. ...

In a recent decision reversing corporate transactions involving policyholders' funds, which had been approved by Ottawa, an Ontario judge [Johanne Morissette of Ontario Superior Court] felt the need to remind the Office of the Superintendent of Financial Institutions of its duty to protect the rights and interests of policyholders when carrying out its mandate. Let's hope someone in Ottawa has been paying attention.

[The reference above is to an Oct.10, 2010 Ontario Superior Court judgement involving a class action by London Life policyholders against Great-West Life led by former London Life executive Bill Rudd; on this subject see also column No.118 posted Oct.8, 2010 to RickardsRead.com: "Great-West 0, par policyholders 1". The case was also the subject of an article by R.A. Rickard in the Dec., 2010 issue of Joseph Belth's periodical The Insurance Forum.]

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Friday, November 18, 2011

(No.178) Sun Life: nails & screws

Years ago, at a time in my life when I still thought I might follow my graduate studies in history all the way to a lifetime career in the academy (I didn't), one of my favourite historians was the English don Sir Lewis Namier.

Historians are every bit as waspish in their rivalries with peers as are (I later observed) business executives trying to climb the greasy corporate pole.

Namier once said of one of his distinguished peers that "the trouble with Herbert Butterfield is, he swallows a nail and shits a screw." It was an impolite way of referring to writing that is at best unhelpful, that addresses a matter that seems clear but obscures rather than clarifies it.

I recall Sir Lewis' comment when I think about the analysis and commentary in the past decade and more about Manulife on the one hand and Sun Life on the other. Too much of it has fallen into the familiar traps of sycophancy in the case of Manulife and disdain (or at best insufficient attention) in the case of Sun Life.

As I indicated in my last column (No.176) "Manulife jabberwocky" posted Nov. 13 and in a number of previous columns, e.g., "Manulife myth & Sun Life reality" (No.173) posted Oct.1, 2011 on RickardsRead.com, the management of the two companies, especially in terms of protecting financial safety, has been rather different. Yet for years many of the financial community's analysts and commentators buzzed around Manulife under its then CEO Dominic D'Alessandro like groupies around a rock star.

I receive emails from people associated with both Sun Life and Manulife following any column dealing with one or both of the companies. When Sun's CEO Donald Stewart sent an email to Sun employees on Oct 17, the same day the company announced in advance its anticipated loss in the 3rd quarter, it was not well received in some quarters within the company.

The context that needs to be understood is this:

Sun's senior management has gone out of its way to downplay its reliance on the profits from its Canadian operation in favour of a steady stream of blather about how wonderful are Sun's operations in the ever so much more important markets outside this country. When I was still employed at Sun Life my objection to this attitude was one of my frequently exercised hobby horses.

Sun's Canadian agents, managers and staff are, of course, fully aware of the extent to which they continue to provide financial support for the often money-losing Sun operations outside this country. As their operating budgets are squeezed they would at the least appreciate receiving rather more public and internal credit from Sun corporate management where it is due.

Its insufficiency does not serve the cause of improved morale. Consider as an example what a Sun Life manager wrote to me on Oct 18 (the official Sun Q3 results were not released until Nov.2):

"I think there is a story that is being hidden by Sun Life senior management and the advisors [i.e., Sun's Canadian career agents who generate the lion's share of its individual sales] are really suspicious what the real story is! In all past emails re quarterly results, the profit or loss per country was broken down so we could see where the worldwide results came from but they are completely missing this time. Also, this loss took everyone by surprise ....

"It is true that interest rates are low but no lower than the Q1 and Q2 when we had good profits. I wonder (and many advisers are also questioning) if somehow Sun Life erred in their hedging strategy and incurred large losses with respect to the stock market and the segregated funds.

"I am convinced that these guys are not revealing what exactly went wrong and now they are also projecting a huge Q4 loss. It will be only a matter of time before they squeeze expenses again in the Canadian operations to help reduce the real reason behind the bleeding that is being masked in the clever words in Don Stewart's [Oct.17] email."

It appears to me that Sun's early sharing of a little company detail may have been, on balance, counterproductive in its effect on its Canadian sales force if not its staff generally. What explanation was offered at that time raised more questions than it answered. Sun can ill afford to have the people in the most reliable of its operations suspicious not only of facts but senior management's motives.

Among the five business segments of Sun's worldwide operation (Canada, U.S., MFS -- its American mutual fund business, Asia and Corporate) three had Q3 net income with a very modest $11 million for Canada -- but still a plus; the U.S. operation continued to be a profit drain with a loss of $569 million.

Sun Life's Sept.30 year-to-date results demonstrate yet again the importance to Sun's total results of its Canadian operation: in the first 3 quarters of the year the Canadian operation had net income of $483 million while its total operating results show a loss of $325 million.

Since Kevin Dougherty's Jan. 2010 return as president of the Sun Life Canadian operation (welcomed by most Canadian agents and staff) some progress has been made in getting a bit of 'extra' money 'invested' in agency distribution which is a key to continuing and increasing profits from this most reliable and consistently profitable part of the Sun empire (Q3 individual life and health insurance sales in Canada were up 9%).

But corporate 'investment' in the Canadian operation's key career agency distribution system has been, by comparison with the corporate treasure being sucked up by activity outside Canada, virtually invisible.

As for Sun's forecast 4th quarter negative result (involving an expected one time hit to net income of $550-$650 million), it strikes me as being consistent with Sun's longtime approach to financial safety. Sun says it is going to amend the valuation of its variable annuity and seg fund business in order to "provide for the estimated future lifetime hedging costs of those contracts in our liabilities."

One of the things Sun Life corporate management needs to do is a much better job of communicating clearly and fully with its own people, especially in Canada. Otherwise they can expect their credibility to decline further in the medium to longer term.

To paraphrase Sir Lewis Namier for the benefit of Sun Life corporate management: don't swallow nails and shit screws so that Sun's Canadian agents and staff aren't forced to parse every sentence coming from the white tower in Toronto searching for the real meaning, having to examine management's words as if they were tea leaves.

by Alastair Rickard

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email: Alastair.Rickard@sympatico.ca

blog: www.RickardsRead.com

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Sunday, November 13, 2011

(No.177) Manulife jabberwocky

In an Oct.1, 2011 column ["Manulife myth vs Sun Life reality" on RickardsRead.com (No.173)] I commented on several matters related to Sun Life and Manulife including the role of retiring CEO Don Stewart as well as the disparity in the perception and treatment over time by the media of the companies' respective performances.

On Oct.17 Sun Life announced, ahead of the official release of its 3rd quarter results on Nov. 2, that it anticipated a loss for the quarter. It is worth noting the context established subsequently by the respective 3rd qtr 2011 results reported at the beginning of November by Sun Life and Manulife:

1. Sun Life: an operating loss of $572 million compared with operating net income of $403 million in Q3 2010;

2. Manulife: a loss of $1.28 billion compared with a loss of $2.25 billion in Q3 2010.

It is worth noting that Manulife CEO Donald Guloien served at the right hand of his predecessor Dominic D'Alessandro during a management regime, one which appeared at times to operate within a self-constructed reality, which exposed Manulife to the massive unhedged financial risk which is still hammering the company. In announcing Manulife's 3rd quarter results Guloien declared that " we are pleased [sic] that our hedging program worked during these volatile markets, eliminating the majority but not all of the risk. It gives us the resolve to extend our hedging program further ...."

Let's translate Guloien's doublespeak:

'Manulife, which ceased in 2004 to hedge the massive financial risk to the company of the $billions of guaranteed variable annuities it was selling (the effect of not hedging was to inflate profits and senior management compensation) has -- since Manu went into a financial ditch -- been trying to find the money to belatedly hedge as much of this in force risk as we can afford to do. Because we are continuing to have the financial crap kicked out of us we have to keep working toward a level of hedging protection related to that risky business which Sun Life never stopped maintaining.'

Not content with his corporate spin CEO Guloien goes on to point out how much more Manulife, a Canadian company, would have had in third quarter earnings under a U.S. regulatory regime than its Canadian one. Indeed he argues that "regulatory risk is the biggest risk to our [Canadian life insurance] industry."

Oh what a shame for poor Manulife! What codswallop.

Manulife shareholders and policyholders would have been the parties to deserve one's sympathy even more than they already do had Manulife senior management (who were happy to roll dice in Canada) been subject instead to the oh so desirable sort of 'freedom and flexibility' of a U.S. financial regulatory regime which both allowed and encouraged the 2007-2008 financial crisis. It is a regime which can now be clearly seen to be one of the inevitable outcomes of the cloud-cuckoo-land Wall Street had become -- and to a significant extent still is.

To the extent that Canadian life insurance companies will be required to maintain higher capital ratios than heretofore, so much the better for their policyholders. And the senior managements of Canadian companies would do well to spare the public their pissing and moaning (via the financial media) about the hardship imposed by mark-to-market valuations.

Security of their money, not obscene levels of executive compensation rewarding incompetent or at best mediocre management, is what informed policyholders will support. So will political interest, all the more so because of the political bows still being taken in Canada for the 'safety and superiority' of Canadian financial services during the international financial crisis.

(I will turn to the subject of Sun Life's third quarter results in a future column.)

by Alastair Rickard

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Wednesday, November 9, 2011

(No.176) Barcelona: 3 of its treasures

On the second visit Pat and I made recently to Barcelona in the Catalan region of Spain there were many worthwhile places left for us to visit -- as indeed there would be on a third, fourth or fifth visit.

One of the barcelonin best known to the world is Antoni Gaudi, the Catalan architect and designer whose church, La Sagrada Familia, is still a work in progress a century after its beginnings (see "Strange meets unusual: Barcelona's Sagrada Familia", column No. 127 posted Dec.14,2010 to www.RickardsRead.com). Between 1885 and 1914 the work of Gaudi and Modernista movement architects help endow modern Barcelona with its unique public face.

A commercial failure with which Gaudi was associated is today a major attraction. It is the 15 hectare Park Guell. At the beginning of the 20th century Barcelona banker Count Eusebi Guell decided to construct on the slopes of Barcelona's Muntabya Pelada an English-style village of 60 homes for the wealthy to occupy.

Guell was a patron of Gaudi who took on the job and designed, among other features, a showcase home in which Gaudi actually lived for a time plus extensive landscaped gardens. The project attracted no buyers and ca 1923 Guell donated the park to the city. Only two houses were built but the park and Gaudi's designs including three curved viaducts and most of the existing vegetation were kept.

Park Guell has been an impressive and centrally located public facility in Barcelona ever since it was donated to the city. It showcases Gaudi's unique work in a nature setting. Today the spired Casa-Museu Gaudi, where the architect lived for much of the last two decades of his life (1906-1926), is a Gaudi museum which includes memorabilia and furniture he designed.

Beneath an unusual 'market square', where sellers gather to hustle stuff to tourists, is an area featuring 86 columns. The space above it is circumscribed by a "wave bench", a continuous stone bench decorated in coloured mosaic.

Park Guell is an unusual and fascinating place and, despite the crowds of tourists and barcelonin who visit, one not to be missed.

Sources, see:

www.casamuseugaudi.org
www.barcelona.com

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If Park Guell is crowded with punters when one visits ( a distinct possibility, depending upon the day and time of year) the Monastery of Pedralbes will not be.

It is a quietly impressive complex of buildings the origin of which is in 1327 when the monastery was founded by Queen Elisenda de Montcado. From its inception the monastery was occupied by Poor Clare nuns, the female branch of the Franciscan Order. Today nuns of the Order still live in one part of the monastery.

The Monastery is one of the ten or so sites which are part of the Museu D'Historia De Barcelona. A ticket purchased to visit the monastery gives the visitor access to other sites.

The monastery is a fine example of Catalan Gothic architecture including the church and the three story cloister. The latter is considered to be one of the most spacious and graceful in this style anywhere.

Around the central cloister which is open to the sky are the day cells formerly used by the nuns. The garden and fountains of the cloister offer a quiet beauty and an impressive sense of religious and historical continuity. The church itself contains the tomb of Queen Elisenda, and it is appropriately lit by 14th century stained glass windows.

Also available for viewing are the abbey chapterhouse, the refectory, the kitchen, the Dormidor and the infirmary, one of the last examples remaining of a Renaissance hospital building.

The Dormidor, the nuns' old sleeping quarters, houses an exhibition "The Monastery Treasures". It is a selection of the artwork, furniture and religious objects accumulated over seven centuries.

The Monastery of Pedralbes is an impressive place to visit. The pleasure is enhanced by the quieter atmosphere provided by far fewer people wandering around than at Park Guell. The monastery lacks the celebrity appeal of the Gaudi name and in some respects this is a benefit for visitors seeking a quieter, less crowded site ( see "Antoni Gaudi of Barcelona", column No.125 posted Dec.2, 2010 to www.RickardsRead.com).

sources, see:

www. museuhistoria.bcn.cat
www.barcelona.de/en/barcelona-monestir-pedralbes.html

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Since 1990 the Pedralbes Palace (Palau Reial de Pedralbes) has housed the Museum of Ceramics (Museu Ceramica). Today it also has an extensive permanent exhibition of clothes through several centuries, "Dressing The Body", plus a large exhibition on design "From The One-off Object to Product Design".

The original buildings date from the 1880s and were until ca 1918 the house of the Guell family. King Alfonso XIII of Spain had the palace built by extending the buildings between 1919 and 1924. He thought there was nowhere in Barcelona at the time suitable for royal functions.

Today the neoclassical Pedralbes Palace is surrounded by the Parc del Palau Reial with its ornamental gardens and paths, impressive and extensive. The palace and its grounds are situated directly across from what has become today the main campus of the ultra-modern University of Barcelona. The stables and porter's lodge (also know as the Pavellons Guell) were, like Park Guell, designed by Gaudi.

The Ceramic Museum has a very extensive and fine collection of Spanish ceramics (including work by Picasso and Miro). 15 of the 18 galleries cover Spanish ceramics from the Caliphiate Age through the 19th century. There are 3 galleries devoted to twentieth century and contemporary ceramics.

The range of attractions at the Pedralbes Palace encompass so many interests (i.e., the palace itself and the Gaudi structures, the gardens, the ceramic, design and textile exhibitions) that a visit is virtually guaranteed to offer satisfaction to almost any visitor.

sources, see:

www. museuceramica.bcn.es/english/home.html
www. dhub - bcn.cat
www. museutextil.bcn.es
www. rutadelmodernisme.com
www.bcn.es/parcsijardins


by Alastair Rickard

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Saturday, October 15, 2011

(No.175) Soulpepper's "The Odd Couple"

A well known and often performed American comedy is playing in Toronto through Nov. 22: the Soulpepper Theatre Company's production of Neil Simon's "The Odd Couple". It is presented at one of Soulpepper's two theatres at the Young Centre for the Performing Arts in the Distillery Historic District.

The Soulpepper Theatre Company was founded in Toronto in 1998 by 12 artists. It has presented a variety of plays, some mainstream, many not. Albert Schultz, one of the founding actors, has been its artistic director since its beginning. It moved into its permanent quarters at the Young Centre in 2005 and is today a mainstay of the theatre in Toronto.

Soulpepper plays have provided Pat and me with a number of enjoyable evenings in the theatre. One that comes immediately to mind is their presentation of Joe Orton's black comedy "Loot" (see column No. 42 on www.RickardsRead.com, posted July 30,2009).

A challenge of sorts in doing "The Odd Couple" is to find something fresh or new in this 1965 hit Broadway play, one that went on to become a popular 1968 movie starring Jack Lemmon and Walter Matthau and a still more popular television series (1970-75) with Tony Randall and Jack Klugman.

Any theatre audience will include many who are familiar with the characters and the premise of the plot. They tend to bring to it both preconceptions and expectations, sometimes based on the movie and/or the series rather than Simon's play.

The original Broadway production of The Odd Couple starred Walter Matthau and Art Carney. The play has been revived many times since, including a production starring Matthau and Tony Randall in a 3 month run at the Theatre Royal in London.

The 'odd couple' in this Soulpepper production are the company's artistic director Albert Schultz as the slob Oscar Madison who takes into his apartment (from which his wife and family have recently departed) the obsessively neat Felix Ungar (who has been ejected from his home by his wife). Felix, a fiercely active cook and housekeeper, is played by Diego Matamoros. They both wear their roles like tailor-made suits; they fit beautifully.

The Odd Couple's director is Stuart Hughes, an actor and (like Schultz, Matamoros and several other members of the cast) a founding member of Soulpepper. He has long associations with most of the eight person cast, as do they with each other -- and it shows. The familiarity supports the play's relationships on stage.

In spite of the challenge of getting laughs from audience members who may already know the laugh lines, the Soulpepper cast carry it off well. The audience clearly enjoyed the play, as did we.

by Alastair Rickard

for ticket information: www.soulpepper.ca or box office 416-866-8666

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Saturday, October 8, 2011

(No.174) Noel Coward's "Private Lives"

Years ago Pat and I attended a production of a Noel Coward play in London's West End. Coward was and still is one of our favourite playwrights and this production of a Coward play remains memorable for me. The reason is that this particular production came from a director and a cast who were seemingly dedicated to giving it an aggressively gay slant.

Indeed, so much was this the case that as I watched it I could almost hear Coward spinning in his grave. So out of tune was it with what the audience expected of a Coward play that half of its members walked out at the first intermission, not to return. I confess that was also my inclination but Pat would not leave so I stayed.

Noel Coward's plays and his dialogue have a particular style and favour a distinctive delivery of that dialogue. Which brings me to a different Coward play, Private Lives, the comedy of manners Coward wrote and in which he performed with his friend Gertrude Lawrence in London in 1930.

This is the play mounted in London in 2010 by the Theatre Royal Bath Company. It starred Kim Cattrall in the Lawrence role and is now at the Royal Alexandra Theatre in Toronto until Oct 30. The production then moves to New York for a Nov.-Feb run. This North American production also stars Canadian Paul Gross in the Coward role opposite Cattrall.

The play's plot can be easily summarized: former spouses (Cattrall and Gross) come to a hotel in Deauville France, each accompanied by her/his new spouse; five years after their divorce they meet by accident and run off together to her Paris apartment leaving their new spouses behind; in Paris the ex-spouses fight as of old; the new spouses catch up with them in Paris and end up fighting with each other; ex-spouses reconcile and sneak away.

This production's English director Richard Eyre appears to have decided to try to make his version of Private Lives distinctive by having the lead characters be less like the sort of actors delivering Coward lines than one would expect in a Coward play -- in other words make it sound less like a Coward version of Private Lives. In this respect I cannot improve on this comment by the most consistently discerning of the major Toronto drama critics, Robert Cushman in the National Post (Sept. 27):

[In the Paris apartment scenes] "The sex is there alright, and the regret, but the wit has mostly gone missing. Coward's lines ... do need charged crispness. Cattrall's delivery is often flustered, and she underrates the adjectives. Gross is effectively hushed rather than conventionally clipped ...."

The English actors who play the new spouses, Anna Madeley and Simon Paisley-Day, are very effective in their supporting roles. Paul Gross' English accent needs some work but his performance as Elyot is on a par with Kim Cattrall's as Amanda. They work well together in their extended scenes although both seem, for my taste, rather more energetic and knockabout in their roles than I think Coward contemplated but clearly it is what director Eyre wants.

Those who are familiar with Kim Cattrall based only on her role on the television series Sex and the City may not appreciate the range of her acting talent, some of which is on display in "Private Lives". I was particularly taken by her performance as Gloria Scabius in a 2010 award-winning British television mini-series based on a 2002 book by the Scottish writer William Boyd, a favourite novelist of mine: Any Human Heart: The Intimate Journals of Logan Mountstuart (Knopf). As for Paul Gross he has demonstrated his theatrical acting skill on stage at Stratford and in worthy endeavours like his impressive effort involving the WWI movie he both directed and acted in: Passchendaele.

I am sometimes amused and always interested by the often differing reviews of plays in Toronto, Stratford and Niagara-on-the-Lake of the drama critics for the three Toronto daily newspapers: Robert Cushman of the National Post, Kelly Nestruk of the Globe and Mail and Richard Ouzounian of the Toronto Star (see for example my column No.96 on www.RickardsRead.com "Critics duelling over An Ideal Husband", posted June 3, 2010).

Among this trio only Cushman (like the critics for the New York Times) does not provide 'ratings' for plays he reviews based on assigning a number of stars out of four -- and good for him. He also seems to me to be the Toronto critic least inclined to bow in the direction of the trendy. As for his review of Private Lives he does not seem to care much for this production although he does not come right out and dump on it. I say "seem" because, even after rereading his review (National Post, Sept.27), I cannot find anything like an overall verdict on this production.

The Globe and Mail's Kelly Nestruk gave this Private Lives production a modified cheer -- three stars out of four -- although the rating seemed higher than was justified by the language of the review (Globe, Sept 26,2011).

Richard Ouzounian of the Star gave this version of Private Lives a rave review ending with a grade of four stars out of four (Star, Sept.26). This could hardly have surprised anyone who had read his article and interviews about this production of the play just prior to its opening (Star, Sept.24). It was so smarmy that his subsequent review of the play itself seemed like part two of the article.

This Coward play has been revived for both West End and Broadway productions a dozen times since its first appearance in a theatre. Although I would have preferred a more traditional production of Private Lives I enjoyed this one. Pat enjoyed it rather more than I did and admonished me that I should not have approached this production almost as if I had expected Noel Coward himself to appear on stage.


by Alastair Rickard

For information and tickets for Private Lives, go to www.mirvish.com or call 416-872-1212

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Saturday, October 1, 2011

(No.173) Manulife myth & Sun Life reality

I have watched and commented in these columns on the disgraceful conduct of various financial services company CEOs and their senior 'team members'. It should have come as no surprise to the supposed 'experts' that the mixture arising from the pursuit of financial self-aggrandizement, incompetence and the willingness to play fast and loose with other people's money formed a mixture toxic in its consequences, one that in the case of too many U.S. and European financial companies was genuinely poisonous.

Canada's financial services marketplace had and still has its share of incompetent, risk-taking senior managers masquerading before an audience of media and analysts as visionary leaders. However in Canada there existed what was absent in the U.S. and Europe: vigorous solvency regulation combined with effective and active enforcement.

It was this regulatory reality that was largely responsible for Canada's favourable record post-2007 financial meltdown. Canadian bankers occasionally become restive with some of the strictures of regulation. They have objected in the past and still do (for a very recent example see the public disagreement on further tightening of regulation between the CEO of the Bank of Nova Scotia and the Governor of the Bank of Canada). The favourable record of Canada's financial sector has provided an opportunity for Canadian bankers to take bows which mainly belong to those who kept them from aping their international peers: the federal financial regulators.

The bulk of my years as a life insurance executive (as well, in my spare time, as a writer, public speaker and editor of the Canadian Journal of Life Insurance) were spent at the head office of Canada's first and only major life insurance company operated anything like a true mutual owned by its participating policyholders: the Mutual Life Assurance Company of Canada (founded 1868). Its name was changed to the rather silly Clarica Life when, unwisely and unnecessarily, it was demutualized early in 1999 at the instance of its senior management, an action that set the stage for the Dec. 2001 announcement of Clarica's takeover by Sun Life and its inevitable subsequent disappearance.

Although Mutual Life had gradually fallen under the sway of certain senior executives and uninformed directors who never really believed in, much less supported mutuality, many people in the company believed in mutuality and supported its continuation as the best way to serve the longer term interests of its policyholders as well as preserving its independence. That latter group included me.

It was against that background that I became an unenthusiastic passenger on Sun Life's takeover train transporting the corpus of what had recently been a superior mutual company owned by its par policyholders (who made up virtually all of its policyholders) to a place where shareholder interests routinely trump those of policyholders.

It wasn't long after I alighted at the Sun Life station that I observed first hand a variety of things about which I had heard before. One was the almost visceral competitive feeling between some people at Sun and those at Manulife.

I did not find this atmosphere off-putting since I had never been a fan of Manulife. Indeed, as editor of CJLI I had created an award I dubbed the Sir Mackenzie Bowell Award named after Canada's least distinguished prime minister (Dec.21,1894-April 27,1896). I awarded it periodically to recognize particular instances displaying an absence of excellence involving the Canadian life insurance industry.

One of my award's recipients had been a CEO of Manulife. It was intended to recognize his having made what I regarded as a mockery out of the practise of mutuality. (Manulife along with Sun Life, Confederation Life, Canada Life and the much smaller Equitable Life of Canada were then all still mutualized former stock companies which had become mutuals in the late 1950s/early 1960s as a way of avoiding foreign takeover. Equitable Life remains a mutual to this day.)

As an emotionally detached 'inside' observer of this culture of corporate competitiveness I was interested by the envy sometimes on display in certain quarters. When Manulife was selling truckloads of guaranteed variable business but Sun much less of this type of product I would smile as I heard certain Sun Life executives lament the fact that Sun trailed Manulife in what was a self-evidently risky market and indeed a less attractive one than some others. Before long it turned out this product would have rather different impacts on the two companies.

All of this came to mind as I read yet another article about Manulife by Tara Perkins in the Globe and Mail's Report on Business (Sept. 24, 2011). I have written a number of columns about Sun Life including its shortcomings as well as about the extent to which Sun has been shortchanged in comparison with Manulife in the financial media (see the list at the conclusion of this column). The Globe's ROB, like most of the financial press, has long devoted a much greater number of column inches to Manulife than to Sun Life and, as the absence (pre-financial ditch) of red flags attest, with little compensatory advantage to readers.

Indeed various elements of the financial services paparazzi -- at least until Manulife went into a deep financial ditch and its then CEO Dominic D'Alessandro went crying to Ottawa to seek regulatory relief for the situation in which the company had put itself as the result of its risk taking (and got less than he sought) -- had habitually preferred to breathlessly report the wondrous performances of both Manulife and its eminently quotable CEO. (I note in passing my understanding that during D'Alessandro's imperium his successor as CEO, Donald Guloien, was at his right hand filling the role of 'Little Sir Echo').

Donald Stewart, CEO of Sun Life and far from a pursuer of media attention, was never so appealing a subject for this crowd.

I was amused by how the applause for D'Alessandro's comments about and 'leadership' of Manulife managed to drown out mention of negatives. For example: of how, in order to inflate Manulife profits, the cost of protecting the company by hedging the considerable financial risk arising from the sale of huge volumes of guaranteed variable business was eliminated through ceasing to hedge beginning in 2004 -- at a subsequent cost to the company measured in the billions of dollars, and counting. Meanwhile at Sun Life, with Donald Stewart as CEO, the hedging of the same type of product risk continued.

In the Sept. 24 Globe ROB article a securities analyst essayed the useful suggestion that Manulife should sell John Hancock Life of Boston which it had purchased for $10.4 billion in 2004 (a mere coincidence of timing ref. Manulife's hedging decision?) and realize funds with which to further gird its financial loins as it faces yet more losses arising from its 'risky business' which even today is still only 60% hedged. He didn't mention such money-losing aspects of John Hancock's operation in the U.S. as its in-force Long Term Care business.

I invite anyone with nothing better to do to revisit the uncritical, almost fawning reception that Manulife's purchase of John Hancock Life received in most quarters of the media and securities communities as the activities of the two D'Alessandros (Dominic of Manu and David of John Hancock) titillated their followers. Still, there were rather more than a corporal's guard of people around who knew something about the reality of the North American life insurance business and who were able to point out at the time (had they been asked) that Manulife was overpaying significantly for a company that was in decline -- but, where never is heard a discouraging word .... until of course the post-2007 meltdown loomed.

The most recent market reversion to downturn once again challenges Manulife's financial position, one which has already experienced the loss of $billions and is looking at still further possible losses this year in the hundreds of millions of dollars. Which brings me back to Donald Stewart of Sun Life.

Stewart will retire as Sun Life Financial's CEO on Nov. 30 this year. During the time I worked for Sun I did not spend much time with him but, as I have written previously, I liked and respected him, particularly the way he treated people even as I disagreed with some of what he said and did as CEO.

It should be more widely recognized by the so-called experts on the life insurance industry that, while D'Alessandro of Manulife was better copy as he performed his crowd pleasing leadership pirouettes for the media and the market (from those performances the financial chickens are still coming home to roost), Donald Stewart was quietly doing what shareholders and policyholders were entitled to expect him to do: protect Sun Life and its future.

He brought Sun Life Financial through a very dangerous period for the North American and European financial system and did so with stability, minimized losses during the Wall Street generated crisis and without serious speculation then or now about the company's future financial stability. By comparison with what has occurred involving some financial institutions in the U.S. and Europe since 2007 -- and at Manulife -- that is no small achievement.

Let it also be said that Donald Stewart will leave Sun Life as a company whose financial condition in a still tumultuous period can be regarded confidently by its various stakeholders as one that will not be the victim of a Manulife-style financial roller coaster -- provided his successor Dean Connor is as careful and as thoughtful a CEO as Stewart has been.

That is the Sun Life reality as distinct from the Manulife myth of superiority so readily swallowed by those whose business it was to have known better. Eventually a marketplace with too little understanding of the realities of the life insurance business here and abroad may yet awaken to that important distinction.


by Alastair Rickard

References:

to read other columns on the subject of Manulife and Sun Life posted this year to RickardsRead.com, see for example:

No.132, posted Jan. 15, 2011, "Sun Life & Manulife: returns and departures"

No.149, posted April 28, 2011, "Sun Life & Manulife: bye-bye retrocession"

No.153, posted May 24, 2011, "Sun Life numbers: kumquats & apples"

No.143, posted March 29, 2011, "Manulife = another Elvis sighting"

No. 138, posted Feb.23, 2011, "Sun Life's Canadian jewel"

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Saturday, September 24, 2011

(No.172) Harold Pinter's Stratford Festival "Homecoming"

In 1975 English author and historian Lady Antonia Fraser, age 42, left her husband MP Hugh Fraser with whom she had six children for English playwright and former actor Harold Pinter, age 44, who was then married to actress Vivien Merchant with whom he had one son.

Lady Antonia and Pinter were together (they married in 1980) until Pinter died on Christmas Eve 2008. Fraser wrote a very affecting account of their time together in a 2010 book entitled "Must You Go? My Life with Harold Pinter".

In the autumn of 2007 a successful production of Pinter's play "The Homecoming" was mounted in New York on the 40th anniversary of its New York Broadway debut. Pinter's health did not permit him to attend. Earlier, in March 2007, Pinter actually took a leading role (as Max) in a BBC Radio 3 production of "The Homecoming".

In the summer of that same year Pinter, whose illness was both lingering and terminal (he died 18 months later), wrote a poem for Lady Antonia. She burst into tears when he read it to her because, she writes, "at the time, and ever after, I recognized it for what it was: a farewell".

"I shall miss you so much when I'm dead
The loveliest of smiles
The softness of your body in our bed,
My everlasting bride
Remember that when I am dead
You are forever alive in my heart and my head"

Anyone who has ever seen "The Homecoming", published in 1965 and widely regarded as one of Printer's best plays (he wrote 28 and won the Nobel Prize for Literature in 2005) will know that his farewell poem to his wife is a universe away from that play's often shocking dialogue.

The Stratford Shakespearean Festival is presenting "The Homecoming" this season until Oct.30 with Brian Dennehy in the role of Max.

The play's claustrophobic focus is on a rather nasty north London working class family of men, the wife and mother having died some years before. There is Max, the father, his two sons and his brother. They assault each other verbally and regularly.

They comprise quite a nasty stew of males who work to project and reinforce their sense of themselves as macho types. This dysfunctional quartet is surprised by the arrival of the third son who departed years before for the U.S. He returns to confront them with his status as a university professor and he has a sexy wife in tow.

In his review of the 1997 Broadway revival of the play the New York Times drama critic Ben Brantley described "The Homecoming" as a "masterpiece of family warfare." It is an apt description.

Brantley also put his finger on a key aspect of any of Pinter's English plays: he noted that "recent broadway revivals of Pinter plays I love ... have left me cold. That's partly because English class accents are important in landing the cadences (and establishing the balance of power) in Mr. Pinter's famously, pause-pocked dialogue. Playing Pinter requires repressing the urge to act actively."

The non-English actors in this season's Stratford production all try to affect English accents but with varying degrees of proficiency, consistency and authenticity. Dennehy's is somewhat better than alright, Aaron Krohn's as son Lenny is very good, the rest of the cast ok.

Overall the cast is strong. Dennehy as Max is a pleasure to watch as the decaying, foul-mouthed old man. Krohn as Lenny, a pimp with the quickest mind in the family, is excellent. Ian Lake as Joey the would-be boxer has less to do but does a convincing portrayal of a son who appears borderline simple-minded. Mike Shara's returning son Teddy seems too emotionally detached, almost an observer while Cara Ricketts as his wife Ruth doesn't seem for much of her time on stage 'hot' enough to give her ultimate involvement with the family believability. Stephen Ouimette as Max's brother Adam conveys an effective mix of stubbornness and deference.

Directed by Jennifer Tarver this production of 'The Homecoming" has the play's necessary atmosphere reinforced by designer Leslie Frankish's set. It looks right; grotty and rundown. It did seem to me that the famous Pinteresque pauses in delivering dialogue were sometimes overdone.

"The Homecoming" is often described as both dark and comedic. Just call it a black comedy with the emphasis on the dark side. This Stratford production of what is arguably Pinter's best play is a superior one and provides a rewarding time in the theatre.


by Alastair Rickard

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Monday, September 19, 2011

(No.171) a reply from Conrad Black

In a recent column "Lord Black: I win" (posted Sept.4, 2011 to RickardsRead.com) I added to what I have said previously about Conrad Black and his legal challenges in the U.S.

The column was occasioned by Lord Black's scheduled return to a Florida prison on Sept 6 ( to Miami FCI, a different prison from Coleman, the federal facility in which he had previously been incarcerated) to complete seven more months before his release scheduled for May 5, 2012. He had been released on bail following the vacating by the U.S. Supreme Court of the 4 out of the 17 original counts on which he had been convicted.

The federal appeals court in Chicago which had rejected his earlier appeal of these charges (the same 4 which the Supreme Court vacated and sent back to them) managed, in Black's words, having "been excoriated [by] a unanimous Supreme Court, when assigned the task of assessing the gravity of its own errors [in upholding the Black convictions in the previous appeal] to resurrect these 2 counts after a gymnastic distortion, suppression and fabrication of evidence." The appeals court in Chicago reinstated 2 of the 4 convictions vacated by the Supreme Court, hence Black's resentencing and return to prison.

Prior to his return to prison and in order to publicize his newly published book A Matter of Principle (McClelland & Stewart, $37) about the events of the past 8 years he gave interviews to a variety of print and broadcast media in which he was, as he is in the book itself, sharply critical of both the U.S. justice system and the Bureau of Prisons.

In my recent column I wrote that "I wonder about the advisability of some of the comments he has made in recent interviews .... Indeed I wonder whether it would not have been wiser to postpone [the book's] publication until after he had completed his prison sentence."

In his reply to me, sent on the same day my column was posted and just before his return to prison, Lord Black emphasized that "the point of my publishing now is to make the point of how completely the enforcement apparatus has failed to intimidate me. It has no ability to extend the sentence, though, as I wrote, they could be more oppressive over the next seven months. But the point about not compromising on principles is you don't compromise."

I am now reading A Matter of Principle, a 581 page work including appendices and extensive index. One of the appendices reproduces Black's address to the Chicago court on June 24, 2011 prior to his resentencing. It is not only eloquent it is a model of effective argument and an impressive refusal to beg the court for mercy or even sympathy. The book itself is fascinating, informative, rewarding and an impressive job of writing. I will return to it in a future column.

The Globe and Mail (Toronto) included a review of the book in last Saturday's book section (Sept.16). The review was written by Douglas Bell, described at review's end as one who "covered the trial of Conrad Black gavel-to-gavel for Toronto Life magazine."

Bell, unlike many journalists in recent years, takes no cheap shots at Black. He describes the book as one that "defies, even mocks, precis, so steep and profound are its roller coasters of insight, enlightenment and depredation." He also cites characteristics of Conrad Black to which I have referred in the past and which I admire. For example, Bell writes that "If there's one thing Black knows how to do, it's throw a punch. ...[he] doesn't know how to take a backward step [in a fight] and as a consequence is incapable of doing anything but give his audience its money's worth." I agree.

Nor does there seem to be even an ounce of self-pity in Black. As I wrote back in July of 2010 (column No.104,"Rooting for Conrad Black") he "is the sort of Canadian I always have time for. This is so for the same sorts of reasons I like Canadians as diverse as Don Cherry, Rick Salutin and the late Tommy Douglas. They are/were self-confident, assertive and willing to take a position they believe in almost without regard to whether some or many people like it or not.

"They seem to me, and I include Lord Black among this type of Canadian, incapable of being intimidated. When I think of Canadians historically, whether in war or when playing hockey, this has been an admirable and highly Canadian trait."

For me Lord Black's Sept.4 reply serves as a reminder that his new book and recent comments show that the authorities have, in his words, "failed to intimidate me". Just so.

by Alastair Rickard

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email: Alastair.Rickard@sympatico.ca

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Friday, September 16, 2011

(No.170) Revenants, Rosicrucians & Luddites

I wrote the following review for publication in two southern Ontario daily newspapers: The Waterloo Region Record and the Guelph Mercury.

It appeared in the Sept.10, 2011 editions of those newspapers.

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David Liss is a talented novelist, one of a group of contempoaray writers whose new books I eagerly await. Historical fiction, or perhaps more accurately, fiction in historical settings is often written but too often not very well, especially in terms of verisimilitude.

David Liss belongs in the company of accomplished historical novelists like Kenneth Roberts (1885-1957) and today's Alan Furst and Philip Kerr, to name just three of my favourites.

As someone who once declined a doctoral fellowship I am particularly interested by the fact that Liss left off working on his doctoral dissertation at Columbia University more than a decade ago to write his first novel, the award-winning A Conspiracy of Paper (2000). It is set in 18h century London as are a couple of subsequent novels. He has said that in his first novel "I chose to write about 18th century British culture and economics because it was something I knew about."

The range of his writing and historical research since the first novel is impressive and reflected in novels set in 17th century Amsterdam (The Coffee Trader), 1790s America (The Whisky Rebels) and modern Florida (The Ethical Assassin).

The new Liss novel, The Twelfth Enchantment, is his seventh and is yet another departure. Its style, subject matter and setting (England during the years of the Napoleonic wars) are reminiscent of aspects of Jane Austen, some Charles Dickens plus a great deal of imaginative writing by David Liss.

The central character is Lucy Derrick, a young impoverished gentlewoman residing ca. 1812 in the provincial city of Nottingham. She does not know but gradually comes to understand that she possesses much sought after mystical powers. She becomes caught up in a struggle involving revenants (walking dead), Rosicrucians (a secret society) and Luddites (anti-industrial machine breakers) and their respective allies in contemporary England.

Others with an oar in this murky political pond include the Prime Minister who is also the secret head of the Rosicrucians as well as the famous aristocratic poet and degenerate Lord Byron. A key plot line running throughout the novel is a desperate, dangerous and highly competitive hunt for all twelve of the widely dispersed pages of the elusive and mystically powerful Mutus Liber.

The Twelfth Enchantment is a testament to David Liss' willingness to try different subjects and approaches and to his skill as a novelist. He creates a plot, one which seems on one level so removed from his previous historical-political fiction yet seems so real on other levels.

The story slows down a bit in those parts of the novel which see Lucy trying to enhance her mystical skills by learning steadily more about spells, curses and the like. However the novel works. It is an unusual mystery set in Regency England.

While The Twelfth Enchantment is not my favourite David Liss novel it is, like all his novels, well worth reading.

++++++++++++++++++++++++++++++++
The Twelfth Enchantment by David Liss
Random House (2011) $30
++++++++++++++++++++++++++++++++

by Alastair Rickard

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Sunday, September 11, 2011

(No.169)'Think And Grow Rich' by 'Moving The Cheese'

As one who spent much of the business part of his working life employed at life insurance company head offices, and having earned three university degrees -- all non-business, I was in amused agreement with something Conrad Black said to the Globe and Mail in a recent interview (Sept.2, 2011).

Asked about business schools he said that "The whole profusion of business schools is in a large measure a reaction that businessmen feel they are looked down upon as not being a learned profession. Commerce really isn't an academic subject. Go work in a business and work your way up ...."

The late Howe Martyn, a Canadian who had been both a senior executive and later Professor of International Business at American University in Washington,D.C., wrote several dozen columns for the magazine I founded and edited as a spare time avocation for some years, The Canadian Journal of Life Insurance. Howe's columns appeared under the ongoing sobriquet of "Economie Sardonique". He used to say that Harvard University's business school had been responsible for ruining more businesses than Carter had pills.

During my years as a 'salaryman', to use the Japanese appellation, I can remember the passage through company corridors of management fad after fad. I remember a CEO who, for a time, seemed -- along with much of the big business community -- much taken with 'the Japanese model'. Articles and consultants discoursing on how and why we should ape Japanese business were as numerous as fleas on a stray dog. Sounds rather silly in retrospect as one contemplates today's still stagnant debt pool which is the Japanese state-driven economy after a decade -- and counting.

At least the Japanese model constituted for a time a rather grand point of reference unlike so many of the other faddish approaches to the running of business that burdened executives with, among other things, time-wasting sessions with various consultants and HR types. I avoided them whenever I could come up with a plausible excuse or conflict but with limited success.

I was reminded recently of this often useless sort of activity, still very much a part of today's 'trendy' big business environment, the kind of thing that helps account for the ongoing deficiencies in the management of large financial services companies among others. A current member of a life insurance company's head office management 'team' wrote to RickardsRead.com to comment on a column I had written reviewing several books: "The Great Stink (and other vacation reading)", column No. 160, posted on July 17, 2011.

"I could never get into these 'business books', " he wrote, "where the writers basically all say the same thing ... and make millions doing so because there is a multitude of people out there (names won't be used ...) who think these books tell the latest and the greatest new leadership style, i.e., Who Moved My Cheese?, Good To Great, etc., etc., etc. Books given to us by our illustrious leaders, books that have yet to be cracked open even once !!!"

My correspondent makes a good point: lots of business books are distributed within companies as part of efforts to be seen to be supporting and furthering the process of teaching and enhancing management skills. "Who Moved My Cheese?" by Spencer Johnson and James C. Collins' "Good To Great: Why some companies make the leap ... and others don't" are simply part of the past decade's stream of business books which hold out the prospect if not the promise of helping those in business maximize their potential.

In the 1980s and 1990s business fads promoted the wisdom of management consultants (an oxymoron surely) joined to 'New Age' thinking: for example, "The Seven Habits of Highly Effective People" by Stephen Corey.

But such supposed manuals for success are nothing new; there have been popular vade mecums in the U.S. and Canada for many decades. In the Great Depression of the 1930s in his book "Think and Grow Rich", Napoleon Hill supposedly encapsulated principles which had made Andrew Carnegie a wealthy American baron of business. In the 1950s Norman Vincent Peale produced "The Power of Positive Thinking" which can still be found in some bookstores.

In my experience and observation over the years -- both in and out of the companies by which I was employed -- the most effective "habit" of executives who rose to the top of the greasy pole was, more often than not, the ability to be a "highly effective" corporate politician. But that business reality will not staunch the flow of trendy books bought by management class salarymen looking for advantage or even escape. As examples consider the recent bestseller by Timothy Ferriss: "The 4-Hour Workweek: Escape 9-5, Live Anywhere, and Join the New Rich"or the current "Start with Why: How Great Leaders Inspire Everyone to Take Action by Simon Sinek.

What senior business management needs, especially in the financial services sector (quod vide the Wall Street shambles of 2007-8), is a great deal more in the way of useful understanding of and skill at the actual business they are in. Bean counting has its limitations. Admittedly such a development would mean hiring fewer consultants to do the jobs executives are already being paid to do.

How likely is such a trend to develop simply because so many in companies' senior managements have demonstrated ongoing incompetence?

About as likely as Prime Minister Harper publicly acknowledging that attracting fewer than 40% of Canadians' votes in the last federal election does not actually constitute receiving 'a mandate from Canadians'.


by Alastair Rickard

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Sunday, September 4, 2011

(No.168) Conrad Black: "I win"

Conrad Black, the Canadian businessman and former newspaper owner, returns to a U.S. federal prison in Florida on Sept.6 to complete a reduced sentence imposed on him following a partially successful appeal of his conviction for 4 of an original 18 charges involving fraud and obstruction of justice. He had been released from prison pending completion of the judicial process arising from his successful appeal to the U.S. Supreme Court.

Some followers of RickardsRead.com will recall that I wrote about Lord Black in a column "Rooting for Conrad Black" (No.104, posted July 22, 2010). In it I quoted from an email I had sent to him in prison prior to his obtaining leave to appeal his conviction to the U.S. Supreme Court. This was followed by his temporary release from prison. I subsequently published his response to my column: "A reply from Conrad Black" (column No. 120 posted Oct.19, 2010).

I have followed Lord Black's career and latterly his legal case with more than casual interest in part because we were contemporaries as undergraduate history majors at Carleton University in Ottawa although we were not friends or even acquaintances but knew a few of the same people.

One of the things I admire about his conduct before, during and after his Chicago trial and while serving a prison sentence beginning in March 2008 (from where he continued to write a weekly column for the National Post as well as a book about his legal challenges) was his refusal to surrender, the absence of any attempt to mitigate either his sentence or his largely negative image with the court or the media.

Indeed I think that his unbending attitude accounts in part for the snotty media coverage of Black and his legal tribulations, coverage which has often absolutely reeked of schadenfreude. An excellent recent example appeared in the Toronto Star on Sept.1, 2011 as a front page "Star Exclusive" by Jennifer Wells. The 'exclusive' billing seemed to have been based primarily on having seen at least parts of Lord Black's new book, A Matter of Principle (McLelland and Stewart, to be published ca Sept. 15).

Examples abound of accused and/or convicted CEOs suddenly discovering God, expressing heartfelt apologies, engaging in energetic bouts of public grovelling and the like. Conrad Black engaged in none of this and never ceased to maintain his innocence after he was convicted. Indeed his statement to the U.S. federal court judge at his recent re-sentencing in Chicago was both eloquent and unbending.

He has refused to seek leniency of sentence through the use of insincere expressions of contrition. In his Sept. 3 column for the National Post prior to returning to a Florida prison on Sept. 6 (a column which might even turn out to be his final one until his sentence has been served) Black refers to the "shirty" attitude of U.S. "officialdom" at "my failure to be adequately chastened by being sent, and sent back, to prison." Just so.

Lord Black is an accomplished historian with several excellent biographies published. A Matter of Principle covers the eight years of his struggle with the U.S. legal system. Its publication coincides with his return to federal prison from which he expects to emerge next spring although I wonder about the advisability of some of the comments he has made in recent interviews given to publicize the publication of his book. Indeed I wonder whether it would not have been wiser to postpone its publication until after he had completed his prison sentence.

In any case I look forward to reading A Matter of Principle from cover to cover. I will write about it in a future column. In the meanwhile I wish both Conrad Black and his wife Barbara Amiel continued courage and resolve as he serves what is expected to be a further 7 1/2 months of imprisonment rather than 18 months.

His words closing his new book are worth quoting now:

"By surviving it all, physically, morally and financially, despite everything and against all odds and disappointments, I win."


by Alastair Rickard

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email: Alastair.Rickard@sympatico.ca

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