Best’s News & Research Service - June 30, 2020 05:04 PM (EDT)
AM Best Affirms Credit Ratings of Manulife Financial Corporation and Its Subsidiaries
- June 30, 2020 05:04 PM (EDT)
Oldwick //BestWire// - 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 (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 of MFC’s subsidiaries reflect their balance sheet strength, which AM Best categorizes as very strong, as well as their strong operating performance, favorable business profile and very strong enterprise risk management.
MFC’s balance sheet strength remains solid despite recent market volatility caused by the pandemic, as the company continues to focus on shedding higher capital-intensive assets and businesses. While financial leverage has increased recently due to the issuance of the equivalent of approximately CAD 3.0 billion of senior and subordinated debt in May 2020, the debt issuance was primarily used as a prefunding measures for upcoming debt maturities, as well as for general corporate purposes. Although MFC’s financial leverage is relatively high compared with industry averages, it remains within AM Best’s guidelines for its current ratings. Additionally, MFC may experience an increase in financial leverage, but it is anticipated to remain within the company’s current rating profile. The ratings also acknowledge the generally favorable operating performance within MFC’s core business lines, particularly the strong new business and earnings growth within its Asia segment over the past several years. While operating trends are expected to be impacted negatively over the near term, similar to the rest of the industry, AM Best believes that MFC will be well-positioned to benefit from its leading market positions within several countries in Asia, as well as the United States and Canada, as economies begin to rebound. 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 AM Best recognizes that MFC 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, as well as charges related to the decision to change the asset mix to support its legacy business. The organization also has faced increased competition within its global wealth and asset management and higher mortality within its Canadian segment. In addition, while MFC 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, which could create some volatility or strain compared with other product lines. Partially mitigating these concerns is MFC’s 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. MFC also utilizes its proprietary capital model to assess risks throughout the organization from reserving and pricing to the establishment of risk tolerances.
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 USD 500 million 4.90% senior unsecured fixed rate, due 2020
— “a-” on USD 1.0 billion 4.15% senior unsecured fixed rate, due 2026
— “a-” on USD 500 billion 2.484% senior unsecured fixed rate, due 2027
— “a-” on USD 1.0 billion 4.70% senior unsecured fixed rate, due 2046
— “a-” on USD 750 million 5.375% senior unsecured fixed rate, due 2046
— “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 3.049% subordinated debentures, due 2029
— “bbb+” on SGD 500 million 3.0% subordinated debentures, due 2029
— “bbb+” on CAD 1 billion 2.237% subordinated debentures, due 2030
— “bbb+” on USD 750 million 4.061% subordinated debentures, due 2032
— “bbb+” on CAD 1 billion 2.818% subordinated debentures, due 2035
The Manufacturers Life Insurance Company—
— “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
John Hancock Life Insurance Company (U.S.A.)—
— “a” on USD 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 Guide to 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 credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.