Press Release

Morningstar DBRS Confirms Credit Ratings on Manulife Financial Corporation at A (high) and The Manufacturers Life Insurance Company at AA, Stable Trends

Insurance Organizations
June 26, 2025

DBRS Limited (Morningstar DBRS) confirmed all credit ratings on Manulife Financial Corporation (Manulife or the Company) and its related entities, including Manulife's Issuer Rating at A (high) and the Financial Strength Rating of The Manufacturers Life Insurance Company (MLI) at AA. All trends are Stable.

KEY CREDIT RATING CONSIDERATIONS
The credit rating confirmations and Stable trends reflect the Company's top-tier franchise across North America and Asia as well as income stability that is underpinned by the Company's diversified operations across products and regions. By engaging in several major reinsurance transactions over the years, the Company has been very successful in its efforts to reduce product risk and to also improve profitability. The most recent derisking reinsurance transaction closed in January 2025 and is notable in that it involved a younger block of its legacy long-term care (LTC) policies than has been the case in the past. As a direct result of these actions, Manulife has been able to free up capital and reduce its exposure to riskier and alternative assets. Notwithstanding the recent leadership changes, notably the retirement of the president and chief executive officer (CEO) in May 2025, Morningstar DBRS expects the Company to continue to execute on its key strategy deliverables, including investments in higher return on equity (ROE) businesses and growth in Asia. Importantly, Manulife's credit ratings are supported by a quality risk management framework that monitors and manages increased financial market volatility as well as the Company's exposure to a unique set of global macroeconomic and geopolitical risks.

CREDIT RATING DRIVERS
Morningstar DBRS would upgrade the credit ratings if Manulife were to reduce its investment risk profile and leverage while maintaining similar profitability measures and capital ratios. Conversely, Morningstar DBRS would downgrade the credit ratings if there were sustained and significant deterioration in the Company's earnings and risk profile leading to a decline in capital ratios.

CREDIT RATING RATIONALE
Franchise Strength Building Block Assessment: Very Strong
The Company enjoys leading market shares in Canada, the United States, and several Asian markets, where it provides a variety of protection and savings products. As such, the Company is well diversified by products and geographies. Multiple distribution channels are increasingly being strengthened through leading artificial intelligence-related technologies. These factors have helped Manulife maintain stability in earnings and resilience by mitigating adverse financial, regulatory, or macroeconomic conditions affecting different geographies and asset classes. Since 2017, originally under the direction of the now former President and CEO Roy Gori, Manulife has been advancing its strategy of increasing profitability while reducing risks and earnings volatility. At the same time, the Company has been striving to become the most digital and customer-focused insurer. Gori retired in May 2025 and was succeeded by Phil Witherington, who has most recently been leading Manulife's Asian business. Morningstar DBRS believes that the leadership transition will carry on smoothly with Manulife continuing its long-standing strategy, which has served the Company well.

Earnings Ability Building Block Assessment: Strong
Manulife generated $5.1 billion in net income attributed to common shareholders during 2024, surpassing the 2023 result by a margin of approximately $300 million and achieving an ROE of 12%. It is important to note that contractual service margin (CSM) can also be considered a strong indicator of long-term profitability, given that part of the new business gains are now recorded in this account and will be recognized into profit over the life of the contract. Manulife has generated close to $3 billion in CSM through new business in 2024, of which the largest proportion is attributable to the Asian region, indicating the strength of potential future earnings, consistent with the Company's goals. Manulife also achieved very strong net inflows of client assets within its global wealth and asset management division, surpassing last year's results and many of its peers. Morningstar DBRS believes that Manulife's profitability is sustainable and potentially higher in the longer term, supported by increasing insurance sales and the resulting new business CSM, fee income growth in its Global Wealth & Asset Management segment, and disciplined expense management.

Risk Profile Building Block Assessment: Strong/Good
Manulife has been able to reduce product risk related to its legacy LTC and guaranteed products by executing on multiple reinsurance transactions with highly rated counterparties. The latest such transaction closed in January 2025 and relates to LTC policies as well as U.S. structured settlements. While reinsurance transactions are subject to recapture risk, the embedded structural protections, such as overcollateralized trusts, partly mitigate this risk. Overall, Manulife benefits from reduced balance sheet risks and capital releases. A large and complex hedging program introduces operational, counterparty, and model risk, as well as collateral spikes in certain market conditions. Positively, Morningstar DBRS views Manulife's strong risk management infrastructure as sophisticated enough to mitigate these risks. Through prudent risk management, Manulife has been able to effectively navigate periods of challenging financial and macroeconomic conditions, including recent episodes of market stress.

Liquidity Building Block Assessment: Very Strong
The Company has a high proportion of liquid securities in its investment portfolio, consisting of government bonds and other investment-grade securities. Robust levels of cash combined with committed lines of credit with different counterparties contribute to Manulife's very strong liquidity position relative to the potential sources of liquidity demand, including from derivatives trades. The Company centrally manages its liquidity program and benefits from a large proportion of policies with a predictable claims profile and product features that limit liquidity risk by reducing the potential for sudden and large policy redemptions. Manulife has also been proactive in adopting new liquidity metrics, measured at different time horizons, that are regularly reassessed through liquidity stress testing.

Capitalization Building Block Assessment: Strong/Good
The Company is maintaining a Life Insurance Capital Adequacy Test Total Ratio for its major operating subsidiary, MLI, of 137% as of Q1 2025, which amounts to approximately $25 billion of regulatory capital above the supervisory target. The Company's financial leverage ratio (including preferred shares and hybrids) as calculated by Morningstar DBRS under IFRS 17 is stable, at 31.1% as at Q1 2025, based on the four-quarter rolling average. Manulife's financial leverage has been at this higher level since the adoption of IFRS 17 in 2023. Morningstar DBRS views this level of leverage as somewhat high for a AA-rated insurance company, which it takes into consideration together with the Company's prudent pre-financing initiatives, as well as excellent access to capital markets and strong fixed-charge ratios.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (May 16, 2025) at https://dbrs.morningstar.com/research/454196.

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

The principal methodology is the Global Methodology for Rating Insurance Companies and Insurance Organizations (September 10, 2024), https://dbrs.morningstar.com/research/439195. In addition, Morningstar DBRS uses the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (May 16, 2025), https://dbrs.morningstar.com/research/454196 in its consideration of ESG factors.

The following methodology has also been applied:
-- Morningstar DBRS Global Corporate Criteria (February 3, 2025), https://dbrs.morningstar.com/research/447186

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

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 https://dbrs.morningstar.com.

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website: https://dbrs.morningstar.com/understanding-ratings

These credit ratings are endorsed by DBRS Ratings Limited for use in the United Kingdom, and by DBRS Ratings GmbH for use in the European Union, respectively. The following additional regulatory disclosures apply to endorsed credit ratings:

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS' trends and credit ratings are monitored.

For further information on Morningstar DBRS historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://registers.esma.europa.eu/cerep-publication. For further information on Morningstar DBRS historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

Lead Analyst: Nadja Dreff, Senior Vice President, Sector Lead
Rating Committee Chair: Michael Driscoll, Credit Rating Officer
Initial Rating Date: August 1, 1989

For more information on this credit or on this industry, visit https://dbrs.morningstar.com.

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 600
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577

Ratings

Manufacturers Life Insurance Company, The
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  • Rating Action:Confirmed
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  • Trend:Stb
  • Rating Recovery:
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  • Rating Action:Confirmed
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  • Trend:Stb
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  • Rating Action:Confirmed
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  • Trend:Stb
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  • Date Issued:Jun 26, 2025
  • Rating Action:Confirmed
  • Ratings:AA
  • Trend:Stb
  • Rating Recovery:
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Manulife Finance (Delaware), L.P.
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  • Rating Action:Confirmed
  • Ratings:A
  • Trend:Stb
  • Rating Recovery:
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Manulife Financial Corporation
  • Date Issued:Jun 26, 2025
  • Rating Action:Confirmed
  • Ratings:A (high)
  • Trend:Stb
  • Rating Recovery:
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  • Date Issued:Jun 26, 2025
  • Rating Action:Confirmed
  • Ratings:A (high)
  • Trend:Stb
  • Rating Recovery:
  • Issued:CAUE
  • Date Issued:Jun 26, 2025
  • Rating Action:Confirmed
  • Ratings:A (low)
  • Trend:Stb
  • Rating Recovery:
  • Issued:CAUE
  • Date Issued:Jun 26, 2025
  • Rating Action:Confirmed
  • Ratings:A
  • Trend:Stb
  • Rating Recovery:
  • Issued:CAUE
  • Date Issued:Jun 26, 2025
  • Rating Action:Confirmed
  • Ratings:Pfd-2 (high)
  • Trend:Stb
  • Rating Recovery:
  • Issued:CAUE
  • US = Lead Analyst based in USA
  • CA = Lead Analyst based in Canada
  • EU = Lead Analyst based in EU
  • UK = Lead Analyst based in UK
  • E = EU endorsed
  • U = UK endorsed
  • Unsolicited Participating With Access
  • Unsolicited Participating Without Access
  • Unsolicited Non-participating

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