Fitch Affirms Manulife Financial Corp & Subs; Rates Manulife Finance Sr & Sub Issues.CHICAGO -- Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has affirmed the ratings of Manulife Financial Corporation (MFC (Microsoft Foundation Class) An application framework for writing Microsoft C/C++ and Visual C++ applications. See application framework. MFC - Microsoft Foundation Class ) and operating subsidiaries, including Canada-based Manufacturers Life Insurance Company (Manulife) and U.S.- based John Hancock Financial Services, Inc. (JHFS JHFS John Hancock Financial Services ) and subsidiaries. In addition, the Insurer Financial Strength rating of both Manulife and John Hancock Life Insurance Company (John Hancock) is affirmed at 'AA+'. Fitch has also assigned debt ratings to Manulife Finance L.P.'s senior (rated 'AA-) and subordinated (rated 'A+') debentures. These rating actions affect over C$5.8 billion in debt and preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. outstanding. (See below for a complete list of the actions.) The Rating Outlook for all ratings is Stable. Rationale for the ratings include MFC's excellent business profile, with market shares among the leaders in the Canadian and United States wealth management and life insurance markets, and a consistent track record of good profitability and growth. Fitch believes that the large, diversified revenues and earnings streams driven by MFC's diverse product lines and distribution channels reduce risk and provide consistent, strong earnings and capital growth. Additional rating strengths are MFC's strong risk adjusted capital, moderate financial leverage, and experienced management team. Fitch's rating concerns are primarily related to the competitive financial markets in which MFC operates and the increasing exposure to equity market related products. Fitch notes that MFC has been a significant seller over the last two years of variable annuities Variable annuities Investment contracts whose issuer pays a periodic amount linked to the investment performance of an underlying portfolio. with guaranteed minimum withdrawal benefits, universal life with secondary guarantees, and long-term care protection products, where product pricing is a key ingredient to long-term profitability. Product risk does not appear to be a negative factor at this time but bears further analysis in the future as product significance grows. Fitch expects MFC to implement a hedging program in 2007 as a part of its variable annuity-guarantee risk management program. Equity-credit-adjusted leverage (under Fitch's new criteria published Sept. 27, 2006) was 9.4% (10.8% when adjusted for 50% of goodwill) at Sept. 30, 2006, and remains within ratings expectations. Fitch assigned a class D designation to the existing hybrids issued by the U.S. intermediate holding company and class E designation to the non-cumulative preferred shares and innovative tier 1 securities issued in Canada. Class D and class E allocate 75% and 100% of the principal to adjusted equity, respectively. Fixed-charge coverage has remained been strong and exceeded 14.0 times (x) on a Canadian GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). EBIT EBIT See: Earnings Before Interest and Taxes EBIT See earnings before interest and taxes (EBIT). coverage basis over the last 12 months. Fitch's Stable Rating Outlook is driven by expectations for another good year for MFC in 2007 in terms of strong operating performance and profitability. Fitch believes that MFC is favorably positioned to increase its market share, especially in the North American and Asia wealth management markets, due to its product manufacturing and distribution strengths, as well as its demonstrated acquisition skills and experienced management. Manulife's MCCSR MCCSR Minimum Continuing Capital and Surplus Requirements (insurance) (minimum continuing capital & surplus requirements) was 210% at Sept. 30, 2006, which exceeded ratings expectations. Fitch expects that MFC is likely to continue to deploy excess capital through moderate levels of stock repurchase and potential block or company acquisition opportunities. Fitch assesses capitalization of John Hancock under NAIC NAIC See National Association of Investors Corporation (NAIC). risk-based capital (RBC RBC red blood cell. RBC or rbc abbr. red blood cell RBC, n See red blood cell count. RBC red blood cells; red blood (cell) count (see blood count). ), which was 359% at Dec. 31, 2005. Financial leverage is expected to remain moderate and below 15% on a Fitch equity adjusted basis. Through the first nine months of 2006 MFC has reported strong, improving profitability with returns on equity exceeding 16%. Favorable equity markets, good investment performance and strong U.S. wealth management sales and a rebound in MFC's reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. division after 2005 Katrina related losses were key drivers in the year to date 2006 results. CGAAP earnings-based fixed-charge coverage on financial debt and preferred stock is expected to be strong, exceeding 12x for 2007. MFC is the second largest North American insurance group in terms of market capitalization and has over C$381 billion in assets under management Assets Under Management (AUM) is a term used by financial services companies in the mutual fund and money management or investment management business to gauge how much money they are managing. at September 30, 2006, which provide scale in its chosen markets. Fitch assigns the following Manulife Finance, L.P. ratings with a Stable Outlook: --C$550 million 4.448% fixed/floating senior debentures due 2026 (Manulife Finance Corp. guarantor) 'AA-'; --C$650 million 5.059% fixed/floating subordinated debentures due 2041 (Manulife Finance Corp. guarantor) 'A+'. Fitch affirms the following, with a Stable Outlook: Manulife Financial Corporation: -Issuer Default Rating (IDR IDR In currencies, this is the abbreviation for the Indonesian Rupiah. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. ) at 'AA'; --C$350 million 4.67% due 2013 at 'AA-'; --C$ $350 million 4.10% Class A, series 1, preferred stock at 'A+'; --C$ 350 million 4.65% Class A, series 2, preferred stock at 'A+'; --C$ 300 million 4.50% Class A, series 3, preferred stock at 'A+'. The Manufacturers Life Insurance Company --Insurer financial strength (IFS) at 'AA+'; --IDR at 'AA'; -- at 'AA-'; --C$550 million 6.24% subordinated debt due 2016 at 'AA-'. John Hancock Life Insurance Company (U.S.A.) --IFS at 'AA+'. The John Hancock Life Insurance Company of New York --IFS at 'AA+'. Manulife Financial Capital Trust --C$60 million 6.7% MaCS Series A at 'AA-'; --C$940 million 7.0% MaCS Series B at 'AA-'. John Hancock Life Insurance Co. --IFS at 'AA+'; --IDR at 'AA'; --US$450 million surplus notes 7.375% due 2024 at 'AA-'. John Hancock Variable Life Ins. Co. --IFS at 'AA+'. Manulife Insurance Company --IFS at 'AA+'. John Hancock Global Funding Ltd. --Global MTN MTN A short-form for Medium Term Note. MTN Medium term notes issued by corporations, much like shorter-term commercial paper. MTN See medium-term note (MTN). program 'AA+'. John Hancock Global Funding II --Global MTN program at 'AA+'. John Hancock Financial Services --Commercial paper program at 'F1+'; --IDR at 'AA'. --US$500 million senior debt 5.625% due 2008 at 'AA-'. Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. 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 Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. |
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