Fitch Rates Manulife's Sub Debt 'A-'

CHICAGO--()--Fitch Ratings has assigned an 'A-' rating to The Manufacturers Life Insurance Company's (MLI) previously issued CAD350 million 2.389% fixed/floating subordinated debentures due 2026 (Manulife Financial Corporation (MFC) guarantor).

KEY RATING DRIVERS

Proceeds from the issuances will be used for general corporate purposes, including future refinancing requirements. Fitch expects June 30, 2015 pro forma financial leverage following the subordinated debt issue, the redemption of CAD350 million of class A, series 1 preferred shares and the maturity of CAD550 million of medium term notes to decline modestly to 19.5% from 19.7% at March 31, 2015.

Fitch affirmed the ratings of MFC and its insurance operating subsidiaries with a Stable Outlook on Jan. 27, 2015.

RATING SENSITIVITIES

Key rating triggers for MFC that could lead to a downgrade include:

-- Decline in core earnings;

-- Elevated charges for actuarial methods and assumptions or experience losses;

-- Fixed-charge coverage on a core earnings basis below 6x;

-- An increase in financial leverage to over 25% or an increase in total leverage to over 35%;

-- A sustained drop in MFC's risk-adjusted capital position with no plans or ability to rectify. This would include the MCCSR ratio falling below 200%. The ratings on the U.S. insurance subsidiaries could be impacted if the U.S. risk-based capital ratio fell below 400%;

-- Inability to successfully integrate the Standard Life Canada acquisition.

Key ratings triggers for MFC that could lead to an upgrade include:

-- Continued improvement in profitability on both a core earnings and reported net income basis;

-- An increase in fixed-charge coverage on a core earnings basis to over 10x;

-- Maintaining current capital and earnings sensitivity to interest rate and equity markets;

-- Continued maintenance of financial leverage near 20%.

FULL LIST OF RATING ACTIONS

Fitch has assigned the following rating:

The Manufacturers Life Insurance Company

-- CAD350 million 2.389% fixed/floating subordinated debentures due 2026 (Manulife Financial Corp. guarantor) 'A-'.

Fitch currently rates the MFC entities as follows:

Manulife Financial Corporation

-- Long-term IDR 'A';

-- CAD550 million medium term notes 5.161% due 2015 'A-';

-- USD600 million senior notes 3.40% due 2015 'A-';

-- CAD900 million medium term notes 4.079% due 2015 'A-';

-- CAD400 million medium term notes 5.505% due 2018 'A-';

-- CAD600 million medium term notes 7.768% due 2019 'A-';

-- USD500 million senior notes 4.90% due 2020 'A-';

-- CAD350 million 4.10% non-cumulative class A, series 1, preferred stock 'BBB';

-- CAD350 million 4.65% non-cumulative class A, series 2, preferred stock 'BBB';

-- CAD300 million 4.50% non-cumulative class A, series 3, preferred stock 'BBB';

-- CAD200 million 4.20% non-cumulative rate reset, preferred class 1, series 3 stock 'BBB';

-- CAD200 million 4.40% non-cumulative rate reset, preferred class 1, series 5 stock 'BBB';

-- CAD250 million 4.60% non-cumulative rate reset, preferred class 1, series 7 stock 'BBB';

-- CAD250 million 4.40% non-cumulative rate reset, preferred class 1, series 9 stock 'BBB';

-- CAD200 million 4.0% non-cumulative rate reset, preferred class 1, series 11 stock 'BBB';

-- CAD200 million 3.80% non-cumulative rate reset, preferred class 1, series 13 stock 'BBB';

-- CAD200 million 3.90% non-cumulative rate reset, preferred class 1, series 15 stock 'BBB';

-- CAD350 million 3.90% non-cumulative rate reset, preferred class 1, series 17 stock 'BBB';

-- CAD250 million 3.80% non-cumulative rate reset, preferred class 1, series 19 stock 'BBB'.

The Manufacturers Investment Corporation

-- IDR 'A';

-- Short-term IDR 'F1';

-- Commercial paper 'F1'.

Manulife Financial Capital Trust II

-- CAD1 billion 7.405% MaCS II series 1 'A-'.

Manulife Finance, L.P.

-- CAD550 million 4.448% fixed/floating senior debentures due 2026 (Manulife Financial Corp. guarantor) 'A-';

-- CAD650 million 5.059% fixed/floating subordinated debentures due 2041 (Manulife Financial Corp. guarantor) 'BBB+'.

The Manufacturers Life Insurance Company

-- Insurer Financial Strength (IFS) 'AA-';

-- IDR 'A+';

-- CAD550 million 4.210% fixed/floating subordinated debentures due 2021 (Manulife Financial Corp. guarantor) 'A-';

-- CAD500 million 4.165% fixed/floating subordinated debentures due 2022 (Manulife Financial Corp. guarantor) 'A-';

-- CAD200 million 2.819% fixed/floating subordinated debentures due 2023 (Manulife Financial Corp. guarantor) 'A-';

-- CAD250 million 2.926% fixed/floating subordinated debentures due 2023 (Manulife Financial Corp. guarantor) 'A-';

-- CAD500 million 2.811% fixed/floating subordinated debentures due 2024 (Manulife Financial Corp. guarantor) 'A-';

-- CAD500 million 2.640% fixed/floating subordinated debentures due 2025 (Manulife Financial Corp. guarantor) 'A-';

-- CAD750 million 2.100% fixed/floating subordinated debentures due 2025 (Manulife Financial Corp. guarantor) 'A-'.

John Hancock Life Insurance Co (U.S.A.)

-- IFS 'AA-';

-- IDR 'A+';

-- USD450 million surplus notes 7.375% due 2024 'A'.

The John Hancock Life Insurance Company of New York

-- IFS 'AA-'.

John Hancock Life & Health Insurance Company

-- IFS 'AA-'.

John Hancock Global Funding II

-- Global MTN program 'AA-'.

Additional information is available on www.fitchratings.com

Applicable Criteria

Exposure Draft: Insurance Notching Criteria (Proposed Methodology Changes) (pub. 12 May 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=865576

Insurance Rating Methodology (pub. 04 Sep 2014)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=756650

Additional Disclosures

Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=985983

Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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Contacts

Fitch Ratings, Inc.
Primary Analyst
Tana M. Higman, +1-312-368-3122
Director
70 W. Madison Street
Chicago, IL 60602
or
Secondary Analyst
Dafina M. Dunmore, CFA, +1-312-368-3136
Director
or
Committee Chairperson
James B. Auden, CFA, +1-312-368-3146
Managing Director
or
Media Relations, New York
Alyssa Castelli, +1-212-908-0540
alyssa.castelli@fitchratings.com
Elizabeth Fogerty, +1-212-908-0526
elizabeth.fogerty@fitchratings.com

Contacts

Fitch Ratings, Inc.
Primary Analyst
Tana M. Higman, +1-312-368-3122
Director
70 W. Madison Street
Chicago, IL 60602
or
Secondary Analyst
Dafina M. Dunmore, CFA, +1-312-368-3136
Director
or
Committee Chairperson
James B. Auden, CFA, +1-312-368-3146
Managing Director
or
Media Relations, New York
Alyssa Castelli, +1-212-908-0540
alyssa.castelli@fitchratings.com
Elizabeth Fogerty, +1-212-908-0526
elizabeth.fogerty@fitchratings.com