A.M. Best Affirms John Hancock Mutual Life Financial Strength Rating &Assigns Debt Rating on Completion of IPO.Business Editors OLDWICK, N.J.--(BUSINESS WIRE)--Jan. 27, 2000 A.M. Best Co. has affirmed af·firm v. af·firmed, af·firm·ing, af·firms v.tr. 1. To declare positively or firmly; maintain to be true. 2. To support or uphold the validity of; confirm. v.intr. the A++ (Superior) financial strength rating of John Hancock Mutual Life Insurance Co. (to be renamed John Hancock Life Insurance Co. after its reorganization) and its two principal life insurance subsidiaries, John Hancock Variable Life Insurance Co. and Investors Partner Life Insurance Co. A.M. Best also assigned as·sign tr.v. as·signed, as·sign·ing, as·signs 1. To set apart for a particular purpose; designate: assigned a day for the inspection. 2. an initial rating of aa- to John Hancock's existing 7.38% Surplus Notes due 2024. These rating actions follow John Hancock's successful completion of its initial public offering and the demutualization Demutualization The process of changing corporate structure from a mutual fund company to some other form, such as a limited liability or corporation. Notes: This means mutual/life insurance companies convert from policyholder companies to stock companies. process. John Hancock Life will be a direct subsidiary of John Hancock Financial Services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. , Inc., a holding company formed to effect the change in John Hancock's corporate structure to public ownership. These rating actions reflect John Hancock's position as a leading provider of life insurance and pension products and services, its sound capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets. and excellent earnings performance, its expertise in investment management and its strong risk management capabilities, particularly with respect to interest rate risk and overall asset/liability management Asset/Liability Management A technique companies employ in coordinating the management of assets and liabilities so that an adequate return may be earned. Also known as "surplus management. . The ratings also reflect the earnings diversification Diversification A risk management technique that mixes a wide variety of investments within a portfolio. It is designed to minimize the impact of any one security on overall portfolio performance. Notes: Diversification is possibly the greatest way to reduce the risk. and growth in its core lines of business, and its success in developing non-traditional distribution sources. These ratings are further supported by John Hancock's low financial leverage and strong interest coverage. At Sept. 30, 1999, John Hancock's long term debt to equity plus long term debt was 9.5%. Total debt to adjusted capital of approximately 15% (which includes $446.9 million of surplus notes and $279.8 million of commercial paper issued by John Hancock Mutual Life, and $89.9 million of medium term notes issued by JH Capital Corp., which has a net worth maintenance agreement with John Hancock) provides the organization with a high level of financial flexibility. A.M. Best believes these strengths, along with its strong franchise value, will allow the company to continue to compete successfully over the near term. Partially offsetting these advantages are the significant challenges John Hancock faces over the next several years that could pressure its rating. These rating factors include John Hancock's ability to transition the company's corporate culture to that of a publicly traded entity while at the same time continuing to reduce its expense infrastructure and accelerate revenue and asset growth, all of which Best believes are necessary for the company to remain competitive with larger and more diversified financial The diversified financial services segment includes a range of consumer and commercially-oriented companies offering a wide variety of products and services, including various lending products (such as home equity loans and credit cards), insurance, and securities and investment services companies. A.M. Best notes that John Hancock is exposed to potential earnings volatility from fluctuations in the security markets that could adversely affect their variable life and annuity annuity: see insurance. annuity Payment made at a fixed interval. A common example is the payment received by retirees from their pension plan. There are two main classes of annuities: annuities certain and contingent annuities. businesses. The rating agency also noted that its life insurance sales are highly dependent on third party distribution sources. Finally, John Hancock will be challenged in the future by increased competition from other mutual funds and investment managers, as well as from other life insurers. A.M. Best also affirmed the A+ (Superior) rating of Maritime Life The Maritime Life Assurance Company was a Canadian insurance company based in Halifax, Nova Scotia. It was founded in 1922 and in 2004 it became fully integrated with Manulife Financial, with the Maritime Life brand being retired. In 2004 it employed 2700 employees. Assurance Co., John Hancock's Canadian subsidiary. A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com. |
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