Fitch Rates Manulife Financial's Senior Unsecured Notes 'A-'

CHICAGO--(BUSINESS WIRE)--Fitch Ratings has assigned an 'A-' rating to Manulife Financial Corporation's (MFC) USD270 million 3.527% senior notes due 2026, which is anticipated to close on Dec. 2, 2016.

KEY RATING DRIVERS

The rating for the new offering is equivalent to the rating on MFC's existing senior debt. Proceeds from the issuance will be used for general corporate purposes. Fitch expects pro forma financial leverage following the senior note issuance along with the November 2016 preferred share issuance and fourth-quarter debt redemption to decrease to 23.3% from 23.8% at Sept. 30, 2016.

Fitch affirmed the ratings of MFC and its insurance operating subsidiaries with a Stable Outlook on July 18, 2016. For more details, see Fitch's press release at www.fitchratings.com.

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 minimum continuing capital and surplus requirement (MCCSR) ratio falling below 200%. The ratings on the U.S. insurance subsidiaries could be affected if the U.S. risk-based capital ratio fell below 400%;

--Large acquisitions that are outside the company's historical risk preference or that have a material impact on the company's leverage and capitalization.

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

--Improvement in return on equity (ROE) based on core earnings to 12% or higher;

--Stability in reported net income;

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

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

--Maintenance of financial leverage at or below 20%.

FULL LIST OF RATING ACTIONS

Fitch has assigned the following rating:

Manulife Financial Corporation

--USD270 million 3.527% senior notes due 2026 at 'A-'.

Fitch currently rates the MFC entities as follows:

Manulife Financial Corporation

--Long-term IDR at 'A';

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

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

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

--USD1 billion 4.15% senior notes due 2026 at 'A-';

--USD750 million 5.375% senior notes due 2046 at 'A-';

--USD1 billion 4.7% senior notes due 2046 at 'A-';

--SGD500 million 3.85% fixed/floating subordinated debentures due 2026 at 'BBB+';

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

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

--CAD158 million 2.178% non-cumulative rate reset, class 1, series 3, preferred stock at 'BBB-';

--CAD42 million non-cumulative floating rate, class 1, series 4, preferred stock at 'BBB-';

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

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

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

--CAD200 million 4% non-cumulative rate reset, class 1, series 11, preferred stock at 'BBB-';

--CAD200 million 3.8% non-cumulative rate reset, class 1, series 13, preferred stock at 'BBB-';

--CAD200 million 3.9% non-cumulative rate reset, class 1, series 15, preferred stock at 'BBB-';

--CAD350 million 3.9% non-cumulative rate reset, class 1, series 17, preferred stock at 'BBB-';

--CAD250 million 3.8% non-cumulative rate reset, class 1, series 19, preferred stock at 'BBB-';

--CAD425 million 5.6% non-cumulative rate reset, class 1, series 21, preferred stock at 'BBB-';

--CAD475 million 4.85% non-cumulative rate reset, class 1, series 23, preferred stock at 'BBB-'.

The Manufacturers Life Insurance Company

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

--IDR at 'A+';

--CAD550 million 4.21% fixed/floating subordinated debentures due 2021 (Manulife Financial Corp. guarantor) at 'A';

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

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

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

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

--CAD500 million 2.64% fixed/floating subordinated debentures due 2025 (Manulife Financial Corp. guarantor) at 'A';

--CAD750 million 2.1% fixed/floating subordinated debentures due 2025 (Manulife Financial Corp. guarantor) at 'A';

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

--CAD1 billion 3.181% fixed/floating subordinated debentures due 2027 (Manulife Financial Corp. guarantor) at 'A'.

The Manufacturers Investment Corporation

--IDR at 'A';

--Short-term IDR at 'F1';

--Commercial paper at 'F1'.

Manulife Finance, L.P.

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

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

Manulife Financial Capital Trust II

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

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

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

--IDR at 'A+';

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

The John Hancock Life Insurance Company of New York

--IFS at 'AA-'.

John Hancock Life & Health Insurance Company

--IFS at 'AA-'.

Date of Relevant Rating Committee: July 18, 2016

Additional information is available on www.fitchratings.com

Applicable Criteria

Insurance Rating Methodology - Effective May 17, 2016 to Sept. 15, 2016 (pub. 17 May 2016)

https://www.fitchratings.com/site/re/881564

Additional Disclosures

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1015570

Endorsement Policy

https://www.fitchratings.com/regulatory

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