Fitch Affs John Hancock's IFS Rtgs; Revises JHF's Outlook to Neg.
CHICAGO--(BUSINESS WIRE)--April 24, 2003
Fitch Ratings has affirmed the 'AA' insurer financial strength ratings of John Hancock Life Insurance Company (JHL) and its subsidiaries, John Hancock Variable Life Insurance Company (JHVL) and Investors Partner Life Insurance Company (IPL). Fitch has also affirmed John Hancock Global Funding II's 'AA' global medium term note program rating and the 'A+' rating of JHL's surplus notes. The Rating Outlook for these ratings is Stable.
Additionally, Fitch has affirmed John Hancock Financial Services, Inc.'s (JHF's) 'A+' long-term issuer and senior debt rating, but has revised the Rating Outlook to Negative from Stable. Fitch has also affirmed the 'F1' rating on JHF's $1.0 billion commercial paper program.
Fitch's affirmation for the ratings includes JHF's strong franchise and brand name in the insurance and financial services market; broad product lines and distribution channels that provide the company with a diverse source of revenues and earnings; strong operating earnings capacity in its core, retail individual life and institutional markets; and a solid capitalization and liquidity profile.
Fitch views John Hancock's 2002 operating performance, barring its poor investment results, as solid as exhibited by GAAP-based operating returns on equity of approximately 14% and good sales growth in its leading life, long term care and fixed annuity product lines.
While JHL's total statutory adjusted capital decreased 3% last year to $4.7 billion at December 31, 2002, and risk adjusted capitalization ratios declined from very strong levels, Fitch believes JHL's capitalization provides solid policyholder protection and that the organization has ample liquidity.
Partially offsetting these positives are the continued high level of realized losses in JHL's bond portfolio driven mainly by credit impairments. As market conditions remain difficult in 2003, Fitch expects JHL to continue take a much higher than historical level of credit impairments in its bond portfolio. At year-end 2002, below investment grade bonds accounted for approximately 100% of JHL's adjusted surplus.
Rationale for the Negative Rating Outlook on JHF's long-term debt ratings include Fitch's view that JHF's financial leverage would continue to increase over 2003 to levels that are no longer consistent with the current two tick notching from the current operating companies' 'AA' IFS ratings. Primary drivers of the pressure are expected to be continued high levels of credit-related losses at JHF's main operating company, JHL, and the potential need to provide support for JHL's statutory surplus in 2003. Fitch also noted the continued trend toward higher financial leverage and operating leverage in 2002. Partially offsetting factors include strong fixed charge coverage exceeding 10 times (x) on a GAAP EBIT basis and over 5x on an operating-company dividend basis.
Fitch will pay close attention to capital development at JHF and the effect of credit-related investment losses in the near term on JHL's statutory surplus.
John Hancock is a leading provider of individual life and long-term care insurance, group pension products and annuities. Other financial services offered by the company and its affiliates include retail-oriented mutual funds and pension and investment advisory services. At December 31, 2002, the John Hancock organization had $128 billion of assets under management.
Affirmed ratings: John Hancock Life Insurance Co. --Insurer financial strength ratings 'AA'/Stable Outlook; --Long-term issuer 'AA-'/Stable Outlook; --Surplus notes 'A+'/Stable Outlook. John Hancock Variable Life Ins. Co. --Insurer financial strength rating 'AA'/Stable Outlook. Investors Partner Life Ins. Co. --Insurer financial strength rating 'AA'/Stable Outlook. John Hancock Global Funding II --Global MTN program rating 'AA'/Stable Outlook. John Hancock Financial Services --Commercial paper program rating 'F1'. Rating Outlook Revised to Negative: John Hancock Financial Services --Long-term issuer rating 'A+'/Negative Outlook; --Senior debt 'A+'/Negative Outlook. Maritime Life Assurance of Canada (John Hancock Financial Services guarantor) --Long-term issuer rating 'A+'/Negative Outlook.