MOODY'S PLACES RATINGS OF MANULIFE'S JOHN HANCOCK FINANCIAL SERVICES (A3 SENIOR DEBT) AND SUBSIDIARIES UNDER REVIEW FOR POSSIBLE UPGRADE
New York, July 15, 2005 -- Moody's Investors Service has placed on review for possible upgrade the
ratings of John Hancock Financial Services, Inc. (JHFS --
senior debt at A3). Moody's also placed on review the insurance
financial strength and other ratings of certain life insurance company
subsidiaries led by John Hancock Life Insurance Company (JHLICo --
insurance financial strength (IFS) rating at Aa3).
Moody's said that the review is prompted by positive changes that
have occurred in JHFS and JHLICo since the April 28, 2004 acquisition
of JHFS by Manulife Financial Corporation (MFC, not rated by Moody's).
The rating agency noted that with this acquisition, MFC is now among
the largest and most diversified life-insurance operations in the
United States. The combined MFC US operations have major market
positions in life insurance, fixed, and variable annuities,
as well as in 401(k) savings plans, long-term care,
and institutional investment products.
Moody's said that any rating change would be likely limited to one
rating notch. A one-notch upgrade would equalize the Aa2
IFS rating of JHLICo with that of its sister company, John Hancock
Life Insurance Company (USA), which was the primary US-based
subsidiary of MFC prior to the JHFS acquisition.
Moody's pointed out that the favorable changes occurring at JHFS
and its operating subsidiaries since the merger include the following:
(1) an improved risk profile in the investment portfolio, particularly
regarding the assumption of less credit risk and an orientation towards
a more liquid investment profile; (2) the virtual elimination of
the issuance of institutional investment products, such as funding
agreement-backed notes and guaranteed investment contracts (GIC);
(3) a comprehensive integration of the management, distribution
systems, and products of the two former independent U.S.
operations; (4) substantial cost savings arising from this combination;
and (5) extensive cross-selling of products through the combined
The rating agency said the review will focus on evaluating the benefits
that JHFS and its subsidiaries has gained and is expected to realize from
the integration, as well as on the business and financial plans
the combined U.S. organization intends to implement over
the near to medium term.
Moody's has also assigned an A1 senior unsecured debt rating to a new
JHLICo $2.4 billion SignatureNotes retail note program.
The rating for this new program was also placed on review for possible
upgrade. The new SignatureNotes program replaces a previous program
that was discontinued by the company on July 8, 2005. The
previous program was replaced in order for the new program to accommodate
the addition of a subordinated guarantee to the notes from MFC.
SignatureNotes are senior, unsecured financial obligations of JHLICo
and are marketed to retail investors. These notes are subordinate
to all JHLICo policyholder obligations, including funding agreement-backed
notes; as a result, the rating on this program is 1 notch lower
than the IFSR rating of JHLICo.
MFC has provided a full and unconditional subordinated guarantee of the
payment obligations of JHLICo for notes issued pursuant to the SignatureNotes
program. This guarantee applies to both new issuance of SignatureNotes
under the new program as well as the existing $2.6 billion
of SignatureNotes outstanding under the previous program.
In its consideration of the entire MFC organization, Moody's
added that upward rating pressure could emerge if the following occurs:
(a) the company steers itself through the integration period without material
operational setbacks; (b) reduction in adjusted financial leverage
calculated on a CGAAP basis to the 20% range; (c) Manufacturers'
Life Insurance Company's capital adequacy is maintained at over
225% MCCSR and JHLICo's capital adequacy at over 325% NAIC
RBC; and (d) post-acquisition improvement in its earnings
capacity, predictability, and quality.
Moody's said that, conversely, downward rating pressure
could emerge at MFC if the following occurs: (a) significant disruption
and problems arise out of the integration; (b) adjusted financial
leverage calculated on a CGAAP basis exceeds its historical norm of 25%
for a sustained period; (c) MFC's spread businesses as a percentage
of general account liabilities expands; (d) or MCCSR ratio declines
significantly from its post- acquisition level (approximately 200%).
The following ratings were placed under review for possible upgrade:
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 secured
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.
The following ratings were affirmed with a stable outlook:
Manufacturers Life Insurance Company -- insurance financial
strength at Aa2; short-term rating for commercial paper of
John Hancock 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.
Manulife, headquartered in Toronto, Canada, is an international
provider of life insurance, pension, and investment products.
On March 31, 2005, the company reported consolidated total
general-fund and segregated-fund assets of C$304.7
billion, and it posted total shareholders' equity of C$23.6
Moody's insurance financial strength ratings are opinions on the ability
of insurance companies to repay punctually senior policyholder claims
For more information, visit our website at www.moodys.com/insurance
VP - Senior Credit Officer
Life Insurance Group
Moody's Investors Service
Life Insurance Group
Moody's Investors Service