MOODY'S AFFIRMS MANULIFE'S AND JOHN HANCOCK'S DEBT AND INSURANCE FINANCIAL STRENGTH RATINGS; UPGRADES MARITIME LIFE FOLLOWING COMPLETION OF MERGER
New York, April 28, 2004 -- Following the completion of the merger between Manulife Financial Corporation
(MFC) and John Hancock Financial Services, Inc. (JHFS),
Moody's Investors Service has affirmed the ratings of MFC's primary
life insurance operating company, The Manufacturers Life Insurance
Company (Manulife -- insurance financial strength at Aa2),
and its other rated affiliates. Moody's has also affirmed the ratings
of JHFS (senior debt at A3), John Hancock Life Insurance Company
(John Hancock Life -- insurance financial strength at Aa3),
and JHFS' other rated U.S. affiliates. The outlook
for all ratings is stable.
Concurrently, Moody's upgraded the insurance financial strength
rating of Maritime Life Assurance Company (Maritime Life), which
is John Hancock Life's Canadian subsidiary, to Aa3 from A1.
This action concludes the review for upgrade initiated on September 29,
2003; the outlook for its rating is now stable.
The merger unites the third- and fourth-largest life insurance
groups in Canada, Manulife and Maritime Life, and two sizable
U.S. life insurers: The Manufacturers Life Insurance
Company (USA), and John Hancock Life. The new entity has
notable market presence in all major Canadian and U.S. life
insurance market segments.
The rating agency said the transaction's credit positives include
potential cost efficiencies in combining the Canadian businesses,
increased earnings diversification, and improved market presence
in Canada and the United States.
Credit negatives arising from this transaction include an expected reduction
in capital and the existence of significant post-merger integration
risk and challenges. Regarding the expected capital reduction,
MFC has set aside $3 billion to fund a stock-repurchase
program after the transaction closes; Moody's said that this
will not have a material impact on financial leverage because MFC will
not take on additional debt with the transaction, and also because
JHFS has a lower level of leverage than MFC.
MFC's rating post transaction-close incorporates Moody's
expectation that its financial leverage ratio will remain in the 25%
Moody's notes, however, that neither company has attempted
a combination of this size previously. Therefore, the rating
agency said it will be watchful for any material, unexpected operational
difficulties during the period of integration.
Moody's believes that upward rating pressure could emerge (a) if
MFC manages through the integration period without material operational
setbacks; (b) if it was able to push financial leverage from today's
level down to the 20% range; (c) if its management could maintain
Manulife's capital adequacy at over 225% MCCSR and John Hancock
Life's at over 325% NAIC RBC; and (d) if MFC further
enhances its earnings capacity, predictability, and quality.
On the other hand, the ratings could be lowered if significant disruption
and problems emerge from the integration, if financial leverage
exceeds the historical norm of 25%, or if capital remains
below the levels discussed above.
The following ratings have been affirmed:
Manufacturers Life Insurance Company -- insurance financial
strength at Aa2; subordinated debt at A1; short-term
rating for commercial paper of Prime -1.
Manufacturers Life Insurance Company (USA) -- insurance
financial strength at Aa2.
Manufacturers Investment Corporation -- preferred stock
at P(A3); short-term rating for commercial paper of Prime-1.
MIC Financing Trust I -- preferred stock at A1.
John Hancock Financial Services, Inc.-- Senior
debt at A3; Issuer rating at A3; subordinated debt at (P)Baa1;
junior subordinated at (P)Baa1; preferred stock at (P)Baa2;
and commercial paper rating at Prime-2.
John Hancock Life Insurance Company -- insurance financial
strength at Aa3; senior debt at A1 (including SignatureNotes);
and surplus notes at A2.
John Hancock Canadian Corporation -- backed senior unsecured
debt at A3.
John Hancock Capital Trust I -- preferred stock at (P)Baa1.
John Hancock Capital Trust II -- preferred stock at (P)Baa1.
John Hancock Global Funding II -- backed senior unsecured
debt at Aa3.
Structured Asset Repackaged Trust Series 2002-2 --
backed senior unsecured debt at Aa3.
John Hancock Variable Life Insurance Company -- insurance
financial strength rating at Aa3.
Investors Partner Life Insurance Company -- insurance financial
strength rating at Aa3.
The following rating has been upgraded:
Maritime Life Assurance Company -- insurance financial strength
rating to Aa3 from A1.
MFC, headquartered in Toronto, Canada, is an international
provider of life insurance, pension, and investment products.
On March 31, 2004, the company reported consolidated total
general-fund and segregated-fund assets of C$158
billion, and it posted total shareholders' equity of C$9.4
JHFS, headquartered in Boston, Massachusetts, is primarily
a US provider of life insurance and financial products. As of March
31, 2004, the company reported total assets of US$114
billion and shareholders' equity of US$9.1 billion.
Moody's insurance financial strength ratings are opinions on the
ability of insurance companies to repay punctually senior policyholder
claims and obligations.
For more information, visit our website at www.moodys.com/insurance
Financial Institutions Group
Moody's Investors Service
Vice President - Senior Analyst
Financial Institutions Group
Moody's Investors Service