Best’s News & Research Service - November 19, 2021 09:57 AM (EST)
AM Best Assigns Issue Credit Rating to Manulife Financial Corporation’s New Subordinated Notes
- November 19, 2021 09:57 AM (EST)
Oldwick //BestWire// - AM Best has assigned a Long-Term Issue Credit Rating (Long-Term IR) of “bbb+” (Good) to the CAD 1.2 billion, 4.10% subordinated notes (Limited Recourse Capital Notes Series 2), due March 19, 2082, recently announced by Manulife Financial Corporation (MFC) (Toronto, Canada) [NYSE: MFC]. The outlook assigned to the Credit Rating (rating) is stable.
The capital notes are being issued simultaneously with CAD 1.2 billion non-cumulative fixed rate Class 1 shares, Series 28 (Series 28 shares), which will be held by Computershare Trust Company of Canada, as trustee of Manulife LRCN Limited Recourse Trust. In the event that MFC does not pay interest on or principal of the notes when due, the recourse to each noteholder will be limited to their proportionate share of the Series 28 shares, except in limited circumstances. Interest on the notes at 4.10% will become due and will be paid in equal semiannual installments in arrears on March 19 and Sept. 19 of each year, with the first payment on March 19, 2022. Starting on March 19, 2027, and on every fifth anniversary thereafter until March 19, 2077, the interest rate on the notes will be reset.
The notes will be treated as Tier 1 capital. The proceeds will be used for general corporate purposes, including investment in subsidiaries and potential future redemptions of existing securities. AM Best expects that with the issuance of the Limited Recourse capital notes, MFC’s financial leverage and interest coverage ratios will continue to remain within AM Best’s guidelines for its current rating.
Additionally, despite an anticipated loss in earnings stemming from MFC’s recent U.S. variable annuity reinsurance agreement with Venerable Holdings Inc., AM Best expects the company’s interest coverage ratio to remain within AM Best’s guidelines for its current rating.
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 use of Best’s Credit Ratings, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
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 London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.