DBRS Assigns Rating of A (low), Stable Trend, to Manulife Financial Corporation’s Subordinated Debt

DBRS Limited (DBRS) assigned a rating of A (low) with a Stable trend to Manulife Financial Corporation’s (MFC) 3.049% Fixed/Floating Subordinated Debentures (the Unsecured Subordinated Debentures).

The aggregate principal amount of the offering is $750 million with a maturity date of August 20, 2029. The subordinated debt has a fixed rate of 3.049% until August 20, 2024, and will reset to a floating rate thereafter. MFC has the option to redeem the subordinated debt at par on or after August 20, 2024.

The Unsecured Subordinated Debt rating of A (low) is in accordance with MFC’s Issuer Rating of “A,” which is two notches below the Financial Strength Rating of AA (low) for The Manufacturers Life Insurance Company. The rating is also consistent with DBRS’s insurance methodology, “Global Methodology for Rating Life and P&C Insurance Companies and Insurance Organizations.”

MFC intends to use the net proceeds from the sale of the Unsecured Subordinated Debentures for general corporate purposes, including funding the redemption of MFC’s 7.768% Medium-Term Notes due April 8, 2019 (principal amount of $600 million), and other future financing requirements.

RATING DRIVERS
Negative rating pressure could arise if the Company pursues an aggressive acquisition policy that results in an elevated risk profile or difficulty managing market volatility and hedging programs or if there is a deterioration in leverage and the fixed-charge ratio below the levels supported by the rating. Conversely, positive rating pressure could arise from more consistent profitability, combined with lower financial leverage and an improvement in the fixed-charge coverage ratio. Similarly, meaningful profit gains from the successful execution of MFC’s customer-centric strategy and bancassurance deals could also prove to be positive for the rating.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

The principal methodology is Global Methodology for Rating Life and P&C Insurance Companies and Insurance Organizations (December 2016), which can be found on dbrs.com under Methodologies.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

Lead Analyst: Stewart McIlwraith, Senior Vice President, Head of Insurance – Global FIG
Rating Committee Chair: Michael Driscoll, Managing Director, Head of NA FIG – Global FIG

The rated entity or its related entities did participate in the rating process. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities.