The trend on all ratings is Stable.
KEY RATING CONSIDERATIONS
The ratings and trends reflect the Company's powerful franchise across
Manulife's ratings also consider its relatively large, although decreasing, exposure to guaranteed products in
RATING DRIVERS
The ratings are well placed in the current rating category. However, over the long term, the ratings would be upgraded if Manulife continues to improve profitability and further reduce its exposure to policy guarantees and long-term care products, while maintaining its strong capital profile.
Conversely, the ratings would be downgraded if there is persistently weaker profitability combined with a sustained deterioration in financial leverage and coverage ratios. The ratings would also be downgraded if the Company experiences an adverse event causing regulatory capital to decline substantially.
RATING RATIONALE
The Company's broad and diverse franchise is supported by leading market shares in
Manulife's earnings capacity reflects its solid market position. The Company has made strong progress on multiple fronts in terms of profitability, including improvements in expense efficiency and earnings growth across all lines, especially in
Manulife has materially derisked its legacy portfolios of guaranteed products and long-term care policies. The Company remains committed to continue its portfolio optimization plan and expects that the contribution to core earnings of the relatively riskier variable annuity and long-term care products will become less than 15% by 2025. Manulife has also largely decreased its earnings and capital sensitivity to equity markets and interest rates movements, which also provides support to the ratings. However, this requires a fairly large and complex hedging program that poses additional challenges in terms of operational, counterparty, and model risk, as well as collateral spikes in certain market conditions. Positively, Manulife's strong risk management infrastructure is viewed as sophisticated enough to help mitigate these risks. Moreover, the coronavirus pandemic has proven Manulife's ability to successfully navigate extreme market volatility and unprecedented business conditions.
DBRS Morningstar views Manulife's liquidity position as very strong. The Company has a high proportion of government bonds in its investment portfolio, robust levels of cash, as well as excellent access to capital markets and committed lines of credit. The Company centrally manages its liquidity program and benefits from a large proportion of policies with claims levels that are well within its capabilities. This profile results in a claims distribution that should be largely predictable.
DBRS Morningstar regards Manulife and its subsidiaries as being very well capitalized. Total regulatory capital remains very strong, with the Company maintaining a Life Insurance Capital Adequacy Test (LICAT) Total Ratio for its major operating subsidiary, MLI, of 137% at
ESG CONSIDERATIONS
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.
The Grid Summary Grades for
Notes:
All figures are in Canadian dollars unless otherwise noted.
The principal methodologies are the Global Methodology for Rating Insurance Companies and Insurance Organizations (https://www.dbrsmorningstar.com/research/381667;
For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.
The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found on the issuer page at www.dbrsmorningstar.com.
The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.
This rating is endorsed by
Each of the principal methodologies employed in the analysis addressed one or more particular risks or aspects of the rating and were factored into the rating decision. Specifically, the 'Global Methodology for Rating Insurance Companies and Insurance Organizations' (
Generally, the conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. DBRS Morningstar's outlooks and ratings are monitored.
For further information on DBRS Morningstar historical default rates published by the
Lead Analyst:
Rating Committee Chair:
Initial Rating Date:
For more information on this credit or on this industry, visit www.dbrsmorningstar.com.
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Ratings
Date Issued Debt Rated Action Rating Trend Attributesi
US = Lead Analyst based in USA
CA = Lead Analyst based in
EU = Lead Analyst based in EU
E = EU endorsed
U =
Unsolicited Participating With Access
Unsolicited Participating Without Access
Unsolicited Non-participating
22-Sep-21 Issuer Rating Confirmed AA Stb CA
U
E
22-Sep-21 Unsecured Subordinated Debentures Confirmed AA (low) Stb CA
U
E
22-Sep-21 Non-Cumulative Preferred Shares Confirmed Pfd-1 Stb CA
U
E
22-Sep-21 Financial Strength Rating Confirmed AA Stb CA
U
E
Date Issued Debt Rated Action Rating Trend Attributesi
US = Lead Analyst based in USA
CA = Lead Analyst based in
EU = Lead Analyst based in EU
E = EU endorsed
U =
Unsolicited Participating With Access
Unsolicited Participating Without Access
Unsolicited Non-participating
22-Sep-21 Fixed/Floating Subordinated Debentures Confirmed A Stb CA
U
E
Date Issued Debt Rated Action Rating Trend Attributesi
US = Lead Analyst based in USA
CA = Lead Analyst based in
EU = Lead Analyst based in EU
E = EU endorsed
U =
Unsolicited Participating With Access
Unsolicited Participating Without Access
Unsolicited Non-participating
22-Sep-21 Issuer Rating Confirmed A (high) Stb CA
U
E
22-Sep-21 Medium-Term Notes Confirmed A (high) Stb CA
U
E
22-Sep-21 Limited Recourse Capital Notes Confirmed A (low) Stb CA
U
E
22-Sep-21 Unsecured Subordinated Debentures Confirmed A Stb CA
U
E
22-Sep-21 Non-Cumulative Preferred Shares Confirmed Pfd-2 (high) Stb CA
U
E
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