Press Release - JUNE 27, 2019

AM Best Affirms Credit Ratings of Manulife Financial Corporation and Its Subsidiaries


CONTACTS:
 Michael Adams
Senior Financial Analyst
+1 908 439 2200, ext. 5133
michael.adams@ambest.com

Anthony McSwieney
Senior Financial Analyst
+1 908 439 2200, ext. 5715
anthony.mcswieney@ambest.com

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644
james.peavy@ambest.com

FOR IMMEDIATE RELEASE

OLDWICK - JUNE 27, 2019
AM Best has affirmed the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aa-” of the life/health insurance subsidiaries of Manulife Financial Corporation (MFC) (Toronto, Canada) [NYSE: MFC]. Concurrently, AM Best has affirmed the Long-Term ICR of “a-” and the Long-Term Issue Credit Ratings (Long-Term IR) of MFC. The outlook of these Credit Ratings (ratings) is stable. (See below for a detailed listing of the companies and ratings.)

The ratings reflect MFC’s balance sheet strength, which AM Best categorizes as very strong, as well as its strong operating performance, favorable business profile and very strong enterprise risk management (ERM).

MFC’s balance sheet strength remains solid as the company continues to focus on shedding higher capital-intensive assets and businesses, including the sale of a block of individual and group fixed payout annuities, the sale of its U.S. broker/dealer and the reduction of alternative investments in its general account investment portfolio supporting its legacy business. In addition, financial leverage has declined in recent periods to approximately 26%, which has resulted in improved financial flexibility. The ratings also acknowledge the generally favorable operating performance within its core business lines, particularly the strong new business and earnings growth within its Asia segment. AM Best notes that MFC maintains leading market positions within several countries in Asia, as well as the United States and Canada. Expense reduction initiatives and a focus on improving efficiencies by investing in new, innovative technology also has contributed to the strong operating results in recent periods.

While Manulife continues to manage its legacy businesses actively, AM Best remains somewhat concerned about the significant exposure to its long-term care insurance (LTC) and variable annuity (VA) blocks of business. However, AM Best acknowledges that MFC’s credit risk profile has improved in recent periods due to its very strong ERM capabilities, which includes the hedging or reinsuring of a majority of its VA block and actively seeking to reduce the risk within its LTC business through rate increases and reserve strengthening. The company also utilizes its proprietary capital model to assess risks throughout the organization from reserving and pricing to the establishment of risk tolerances.

While AM Best recognizes that MFC’s has produced steady core earnings growth in recent periods, net income has fluctuated somewhat during this time due to the direct impact of equity and interest rate fluctuations, the impact of the U.S. tax reform, as well as charges related to the decision to change the asset mix supporting it legacy business. The company experienced net outflows in 2018 and the first part of 2019 within its global wealth and asset management segment due to market volatility.

The FSR of A+ (Superior) and the Long-Term ICRs of “aa-” have been affirmed with a stable outlook for the following life/health subsidiaries of Manulife Financial Corporation:


  • The Manufacturers Life Insurance Company

  • John Hancock Life Insurance Company (U.S.A.)

  • John Hancock Life Insurance Company of New York

  • John Hancock Life & Health Insurance Company

The following Long-Term IRs have been affirmed with a stable outlook:

Manulife Financial Corporation—

— “a-” on $500 million 4.90% senior unsecured fixed rate, due 2020

— “a-” on $1.0 billion 4.70% senior unsecured fixed rate, due 2046

— “a-” on $750 million 5.375% senior unsecured fixed rate, due 2046

— “a-” on $1.0 billion 4.15% senior unsecured fixed rate, due 2026

— “bbb” on CAD 350 million 4.65% non-cumulative Class A Series 2 preferred shares

— “bbb” on CAD 300 million 4.5% non-cumulative Class A Series 3 preferred shares

— “bbb” on CAD 158.4 million 2.178% non-cumulative Class 1 Series 3 preferred shares

— “bbb” on CAD 200 million 3.891% non-cumulative Class 1 Series 5 preferred shares

— “bbb” on CAD 250 million 4.312% non-cumulative Class 1 Series 7 preferred shares

— “bbb” on CAD 250 million 4.351% non-cumulative Class 1 Series 9 preferred shares

— “bbb” on CAD 200 million 4.731% non-cumulative Class 1 Series 11 preferred shares

— “bbb” on CAD 200 million 4.414 non-cumulative Class 1 Series 13 preferred shares

— “bbb” on CAD 200 million 3.786 non-cumulative Class 1 Series 15 preferred shares

— “bbb” on CAD 350 million 3.9% non-cumulative Class 1 Series 17 preferred shares

— “bbb” on CAD 250 million 3.8% non-cumulative Class 1 Series 19 preferred shares

— “bbb” on CAD 425 million 5.6% non-cumulative Class 1 Series 21 preferred shares

— “bbb” on CAD 475 million 4.85% non-cumulative Class 1 Series 23 preferred shares

— “bbb” on CAD 250 million 4.70% non-cumulative Class 1 Series 25 preferred shares

— “bbb” on CAD 41.6 million variable rate non-cumulative Class 1 Series 4 preferred shares

— “bbb+” on SGD 500 million 3.85% subordinated debentures, due 2026

— “bbb+” on CAD 600 million 3.317% subordinated debentures, due 2028

— “bbb+” on CAD 750 million 4.061% subordinated debentures, due 2032

— “bbb+” on CAD 750 million 3.049% subordinated debentures, due 2029

— “bbb+” on SGD 500 million 3.0% subordinated debentures, due 2029

The Manufacturers Life Insurance Company—

— “a” on CAD 500 million 2.64% subordinated debentures, due 2025

— “a” on CAD 750 million 2.10% subordinated debentures, due 2025

— “a” on CAD 350 million 2.389% subordinated debentures, due 2026

— “a” on CAD 1.0 billion 3.181% subordinated debentures, due 2027

Manulife Finance (Delaware), L.P.—

— “bbb+” on CAD 650 million 5.059% subordinated debentures, due 2041

Manulife Financial Capital Trust II—

— “a-” on CAD 1.0 billion 7.405% senior unsecured floating rate notes, due 2108

John Hancock Life Insurance Company (U.S.A.)—

— “a” on $450 million 7.375% surplus notes, due 2024 (formerly issued by John Hancock Life Insurance Company)

— “a+” on all outstanding notes issued under the program John Hancock Signature Notes (formerly issued

by John Hancock Life Insurance Company)

The following indicative Long-Term IRs under the shelf registration have been affirmed with a stable outlook:

Manulife Financial Corporation—

— “a-” on senior unsecured debt

— “bbb+” subordinated debt

— “bbb” on preferred stock

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global rating agency and information provider with a unique focus on the insurance industry.


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