Fitch Ratings has affirmed the ratings of Manulife
Financial Corporation (MFC) and operating subsidiaries, including
Canada-based Manufacturers Life Insurance Company (Manulife) and
U.S.-based, John Hancock Financial Services, Inc. (JHFS) and
subsidiaries. The insurer financial strength rating of both Manulife
and John Hancock Life Insurance Company (John Hancock) is affirmed at
'AA+'. The Rating Outlook is Stable for all ratings. These ratings
actions affect approximately C$4.0 billion in debt and preferred stock
outstanding.(See below for a complete list of the actions).
MFC's ratings reflect strong business and financial profiles, leading positions in North American insurance markets and growing operations in Asia. MFC's large, diversified revenue and earning streams, driven by diverse product lines, distribution channels and assets under management, generate consistent, strong earnings and support capital and growth. Additional strengths are MFC's good financial flexibility due to moderate financial leverage and a well-diversified investment portfolio.
MFC's strong 2005 operating performance compares favorably with other large global and North American peers. Fitch believes MFC's scale in its chosen product segments has favorably affected profitability and distribution opportunities. Manulife is a leader in the Canadian marketplace and continues to be a consistent, producer of significant earnings and revenues for MFC. In the United States, MFC has successfully leveraged the 'John Hancock' brand in U.S. markets with increased market share in life insurance and variable annuity sales in 2005.
Fitch's rating concerns include the very competitive markets within which MFC operates and risks associated with any potential large acquisition, although the company has proven its expertise in large, across borders transactions.
Fitch believes MFC's strong, risk adjusted capitalization provides robust support for MFC's policyholder liabilities as well as buoyant growth. Fitch believes that MFC manages its capital with regards to tax and regulatory efficiency, maintaining adequate capital at the holding company level (MFC) in support of target capital on a local company basis, such as John Hancock Life in the United States. Manulife's 2005 minimum continuing capital and surplus requirement (MCCSR) at 213% was unchanged versus 2004 levels. While Fitch expects consolidated risk adjusted capitalization to remain very strong in the absolute, MCCSR could decline modestly from current levels as the company redeploys capital through either share buybacks, an increase in common dividends or future acquisitions. John Hancock reported year-end 2005 RBC at 359%, which was up modestly from year-end 2004. Qualitatively due to significant uses of reinsurance on the companies' closed block of life insurance, Fitch views John Hancock's risk adjusted capital at being closer to MFC's stated RBC targets at 300%-325%, which are below Fitch's 'AA+' standards.
Fitch's Stable Rating Outlook reflects the positive trends in revenues and earnings of MFC for 2006, and consistency achieved through its diversified product lines and distribution channels. Run-rate returns on equity are expected to trend toward 15% with moderate stock buy backs and improving margins. Risk-adjusted capital is expected to decline towards the mid-point of Manulife's target of 180% to 220%, but to remain adequate for the rating. With strong capital and expanding distribution Fitch believes MFC is well-positioned for future growth on an organic basis or through acquisitions.
In 2006, Fitch expects MFC to maintain a conservative financial capitalization profile and very strong fixed charge coverage. Fitch estimates MFC's equity adjusted financial leverage is approximately 10% (11.4% when adjusting equity for 50% of goodwill) at March 31, 2006, which is considered moderate. MFC's consolidated equity-adjusted financial leverage is expected to remain below 15%. MFC's consolidated financial leverage (debt plus preferred stock to capital) was 17% at Dec. 31, 2005, which compares favorably to the company's targeted level of 25%-30%. CGAAP earnings-based fixed charge coverage on finanical debt, and preferred stock is expected to be strong, exceeding 12 times (x) for 2006.
Manulife Financial Corporation:
-- Issuer default rating Affirm 'AA'/Stable;
-- C$350 million 4.67% due 2013 Affirm 'AA-'/Stable;
-- C$350 million 4.10% class A, series 1, preferred stock 'A+'/Stable;
-- C$ 350 million 4.65% class A, series 2, preferred stock 'A+'/Stable;
-- C$ 300 million 4.50% class A, series 3, preferred stock 'A+'/Stable.
The Manufacturers Life Insurance Company
-- Insurer financial strength Affirm 'AA+'/Stable;
-- Issuer default rating Affirm 'AA'/Stable;
-- Subordinated debt C$550 million 6.24% due 2016 Affirm 'AA-'/Stable.
John Hancock Life Insurance Company (U.S.A.)
-- Insurer financial strength Affirm 'AA+'/Stable.
The John Hancock Life Insurance Company of New York
-- Insurer financial strength Affirm 'AA+'/Stable.
MIC Financing Trust I
-- 8.25% Capital trust sec. (TruPS) Affirm 'AA-'/Stable.
Manulife Financial Capital Trust
-- C$60 million 6.7% MaCS series A Affirm 'AA-'/Stable;
-- C$940 million 7.0% MaCS series B Affirm 'AA-'/Stable.
John Hancock Life Insurance Co.
-- Insurer financial strength Affirm 'AA+'/Stable;
-- Issuer default rating Affirm 'AA'/Stable;
-- US$450 million surplus notes 7.375% due 2024 Affirm 'AA-'/Stable.
John Hancock Variable Life Ins. Co.
-- Insurer financial strength Affirm 'AA+'/Stable.
Manulife Insurance Company
-- Insurer financial strength Affirm 'AA+'/Stable.
John Hancock Global Funding Ltd.
-- Global MTN program Affirm 'AA+'/Stable.
John Hancock Global Funding II
-- Global MTN program Affirm 'AA+'/Stable.
John Hancock Financial Services
-- Commercial paper program Affirm 'F1+';
-- Issuer default rating Affirm 'AA'/Stable;
-- US$500 million senior debt 5.625% due 2008 Affirm 'AA-'/Stable.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
MFC's ratings reflect strong business and financial profiles, leading positions in North American insurance markets and growing operations in Asia. MFC's large, diversified revenue and earning streams, driven by diverse product lines, distribution channels and assets under management, generate consistent, strong earnings and support capital and growth. Additional strengths are MFC's good financial flexibility due to moderate financial leverage and a well-diversified investment portfolio.
MFC's strong 2005 operating performance compares favorably with other large global and North American peers. Fitch believes MFC's scale in its chosen product segments has favorably affected profitability and distribution opportunities. Manulife is a leader in the Canadian marketplace and continues to be a consistent, producer of significant earnings and revenues for MFC. In the United States, MFC has successfully leveraged the 'John Hancock' brand in U.S. markets with increased market share in life insurance and variable annuity sales in 2005.
Fitch's rating concerns include the very competitive markets within which MFC operates and risks associated with any potential large acquisition, although the company has proven its expertise in large, across borders transactions.
Fitch believes MFC's strong, risk adjusted capitalization provides robust support for MFC's policyholder liabilities as well as buoyant growth. Fitch believes that MFC manages its capital with regards to tax and regulatory efficiency, maintaining adequate capital at the holding company level (MFC) in support of target capital on a local company basis, such as John Hancock Life in the United States. Manulife's 2005 minimum continuing capital and surplus requirement (MCCSR) at 213% was unchanged versus 2004 levels. While Fitch expects consolidated risk adjusted capitalization to remain very strong in the absolute, MCCSR could decline modestly from current levels as the company redeploys capital through either share buybacks, an increase in common dividends or future acquisitions. John Hancock reported year-end 2005 RBC at 359%, which was up modestly from year-end 2004. Qualitatively due to significant uses of reinsurance on the companies' closed block of life insurance, Fitch views John Hancock's risk adjusted capital at being closer to MFC's stated RBC targets at 300%-325%, which are below Fitch's 'AA+' standards.
Fitch's Stable Rating Outlook reflects the positive trends in revenues and earnings of MFC for 2006, and consistency achieved through its diversified product lines and distribution channels. Run-rate returns on equity are expected to trend toward 15% with moderate stock buy backs and improving margins. Risk-adjusted capital is expected to decline towards the mid-point of Manulife's target of 180% to 220%, but to remain adequate for the rating. With strong capital and expanding distribution Fitch believes MFC is well-positioned for future growth on an organic basis or through acquisitions.
In 2006, Fitch expects MFC to maintain a conservative financial capitalization profile and very strong fixed charge coverage. Fitch estimates MFC's equity adjusted financial leverage is approximately 10% (11.4% when adjusting equity for 50% of goodwill) at March 31, 2006, which is considered moderate. MFC's consolidated equity-adjusted financial leverage is expected to remain below 15%. MFC's consolidated financial leverage (debt plus preferred stock to capital) was 17% at Dec. 31, 2005, which compares favorably to the company's targeted level of 25%-30%. CGAAP earnings-based fixed charge coverage on finanical debt, and preferred stock is expected to be strong, exceeding 12 times (x) for 2006.
Manulife Financial Corporation:
-- Issuer default rating Affirm 'AA'/Stable;
-- C$350 million 4.67% due 2013 Affirm 'AA-'/Stable;
-- C$350 million 4.10% class A, series 1, preferred stock 'A+'/Stable;
-- C$ 350 million 4.65% class A, series 2, preferred stock 'A+'/Stable;
-- C$ 300 million 4.50% class A, series 3, preferred stock 'A+'/Stable.
The Manufacturers Life Insurance Company
-- Insurer financial strength Affirm 'AA+'/Stable;
-- Issuer default rating Affirm 'AA'/Stable;
-- Subordinated debt C$550 million 6.24% due 2016 Affirm 'AA-'/Stable.
John Hancock Life Insurance Company (U.S.A.)
-- Insurer financial strength Affirm 'AA+'/Stable.
The John Hancock Life Insurance Company of New York
-- Insurer financial strength Affirm 'AA+'/Stable.
MIC Financing Trust I
-- 8.25% Capital trust sec. (TruPS) Affirm 'AA-'/Stable.
Manulife Financial Capital Trust
-- C$60 million 6.7% MaCS series A Affirm 'AA-'/Stable;
-- C$940 million 7.0% MaCS series B Affirm 'AA-'/Stable.
John Hancock Life Insurance Co.
-- Insurer financial strength Affirm 'AA+'/Stable;
-- Issuer default rating Affirm 'AA'/Stable;
-- US$450 million surplus notes 7.375% due 2024 Affirm 'AA-'/Stable.
John Hancock Variable Life Ins. Co.
-- Insurer financial strength Affirm 'AA+'/Stable.
Manulife Insurance Company
-- Insurer financial strength Affirm 'AA+'/Stable.
John Hancock Global Funding Ltd.
-- Global MTN program Affirm 'AA+'/Stable.
John Hancock Global Funding II
-- Global MTN program Affirm 'AA+'/Stable.
John Hancock Financial Services
-- Commercial paper program Affirm 'F1+';
-- Issuer default rating Affirm 'AA'/Stable;
-- US$500 million senior debt 5.625% due 2008 Affirm 'AA-'/Stable.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.