Manulife Financial said it will raise $350 million in an issue of preferred shares.

Manulife said it will issue 14 million Series 1 preferred shares priced at $25 per share to raise gross proceeds of $350 million.

The insurer had initially planned an offering of up to 10 million preferred shares, but increased the size of the deal a few hours later due to strong investor demand.

The preferred shares will be entitled to receive a non-cumulative quarterly fixed dividend yielding 5.6 per cent annually for an initial period ending September 19, 2014.

Thereafter, the dividend rate will be reset every five years at a rate equal to the five-year Government of Canada bond yield plus 3.23 per cent.

Approximately half of the net proceeds from the offering will be applied to reduce amounts outstanding under Manulife's credit facility, with the rest to be used for general corporate purposes.