Manulife pays 69 MILLION DOLLARS to shut down class action before trial.

After almost eight years of litigation, a securities class action against Canada’s largest life insurance company settled for $69 million.

In  Ironworkers Ontario Pension Fund v Manulife Financial, 2017 ONSC 2669, the Ontario court approved the payment of honoraria to the representative plaintiffs, the payment of class counsel contingency-based legal fees, and the payment of a preliminary commission to a third-party litigation funder.


Manulife Financial Corporation (“MFC”) is the largest life insurance company in Canada. In early 2004, MFC added several new guaranteed investment products (“the Guaranteed Products”) to its segregated funds line-up. Unlike the older variable annuity products, MFC decided that the new products would not be hedged or reinsured. The risk of fluctuations in the equity market and in generating the money needed to provide the promised return on the Guaranteed Products would be fully borne by MFC itself.

The new Guaranteed Products line was a success. MFC proceeded to grow the business from about $71 billion in early 2004 to about $165 billion by year-end 2008. All, or almost all, of this business was unhedged and uninsured. When the full force of the global financial crisis hit in the fall of 2008 and the Canadian and American equity markets fell by more than 35% and MFC found itself badly overexposed.

On February 12, 2009, MFC released its annual financial statements for year-end 2008. The financial statements noted that over the year corporate profits had fallen by almost $3.8 billion (almost $2 billion of this was attributed to the Guaranteed Products line) and earnings per share had dropped from $2.78 just one year earlier to 32 cents. The financial statements also made clear that the company had to increase its reserves by more than ten times, from $526 million at year-end 2007 to $5.783 billion at year-end 2008, because of its unhedged exposure to the equity market. Noting these losses and the fact that “unlike most of the other large writers of variable annuities and segregated funds in North America, [MFC] has not implemented a comprehensive equity hedging program,” Moody’s placed MFC’s ratings on review for a possible downgrade.

The market reacted immediately. The MFC share price dropped 6% on February 12 on heavy trading volume. Over the next ten days the share price dropped another 37%. By the end of the first quarter of 2009, the shares were trading at $8.92, down from $38.28 just six months earlier—a drop of almost 77%.

Class action lawsuits in Ontario and Quebec followed soon thereafter. A class action was also commenced by MFC shareholders in the U.S.


The Ontario and Quebec class actions were settled after several mediations just as a summary judgment motion was being scheduled in the Ontario action and a few months before the trial was to start in the Quebec action. This was a “late stage” settlement. In a late stage settlement, the supervising class action judge will be justified in assuming that class counsel had a complete or almost complete understanding of the risks and rewards of further litigation and will be more comfortable relying on class counsel’s recommendation that the settlement is indeed fair and reasonable and in the best interests of the class.


The court approved the $69 million settlement, the payment of a $10,000 honorarium to each of the two representative plaintiffs, the payment of class counsel legal fees based on the 22.5 per cent contingency agreement, plus disbursements and taxes, and the payment of a preliminary commission to CFI.