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AM Best affirms Manulife credit ratings

By The IJ Staff | July 05 2019 03:30PM

Credit-rating agency AM Best has affirmed the financial strength rating of A+ (Superior) and the long-term issuer credit ratings of “aa” of the life/health insurance subsidiaries of Manulife Financial Corporation. The outlook for the credit ratings is stable.

The ratings reflect Manulife’s balance sheet strength, which AM Best categorizes as “very strong,” as well as its strong operating performance, favourable business profile and “very strong” enterprise risk management (ERM).

Manulife’s “balance sheet strength remains solid as the company continues to focus on shedding higher capital-intensive assets and businesses, including the sale of a block of individual and group fixed payout annuities, the sale of its U.S. broker/dealer and the reduction of alternative investments in its general account investment portfolio supporting its legacy business,” said AM Best.

In addition, financial leverage has declined in recent periods to approximately 26%, which has resulted in improved financial flexibility. The ratings also acknowledge the generally favourable operating performance within its core business lines, particularly the strong new business and earnings growth within its Asia segment.

Manulife keeps hold of its leading market positions in countries

AM Best notes that Manulife maintains leading market positions within several countries in Asia, as well as the United States and Canada.

However, AM Best said it remains “somewhat concerned” about the significant exposure to its long-term care insurance (LTC) and variable annuity (VA) blocks of business.  The credit rating agency acknowledged that Manulife’s credit risk profile has improved in recent periods due to its very strong ERM capabilities.

While AM Best recognized that Manulife has produced steady core earnings growth in recent periods, net income has fluctuated somewhat during this time due to the direct impact of equity and interest rate fluctuations, the impact of the U.S. tax reform, as well as charges related to the decision to change the asset mix supporting it legacy business.

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