A.M. Best Assigns Debt Ratings to Manulife Financial Corporation and Its Subsidiary’s Preferred Shares and Debt Offerings
OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has assigned a debt rating of “bbb” to the recently issued CAD 200 million 3.90% non-cumulative rate reset Class 1 shares Series 15 of Manulife Financial Corporation (MFC). This offering is for five-year rate reset perpetual preferred shares issued at CAD 25 per share.
A.M. Best also has assigned a debt rating of “a” to the recently issued CAD 500 million, 2.811% aggregate principal fixed/floating subordinated debentures due February 21, 2024 of MFC’s subsidiary, The Manufacturers Life Insurance Company (MLI). The outlook assigned to both ratings is stable. Both companies are domiciled in Toronto, Canada.
The proceeds from both offerings will be utilized for general corporate purposes including future refinancing requirements. The preferred shares are anticipated to qualify as Tier 1 capital for MFC. MLI may redeem the debentures on or after February 21, 2019. The debentures are fully and unconditionally guaranteed on a subordinated basis by the holding company, MFC. With the issuance of the subordinated debentures and preferred shares, A.M. Best notes that MFC’s existing financial leverage remains temporarily elevated but is expected to decline following debt maturities in 2014. Despite the new issuance, MFC’s financial leverage has been decreasing due to capital growth and remains within the range that supports its current ratings.
MFC has reported increased International Financial Reporting Standards earnings for year-end 2013 of
CAD 3.1 million, due primarily to strong growth in the company’s asset management business in Asia, Canada and the United States, increased new business margins in the North American insurance businesses, a gain in the sale of the Taiwan life insurance business and reduced charges related to changes in actuarial methods and assumptions. Mutual fund assets have continued to grow as MFC focuses its growth on higher return on equity and lower risk business. Despite the increased use of hedging to mitigate earnings volatility, A.M. Best will continue to monitor the large book of interest and equity market sensitive in-force business.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
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