CHICAGO--(BUSINESS WIRE)-- (This is an amended version a release issued earlier today containing revised information on the dollar amount of MFC's unrealized losses on alternative asset classes in the fourth paragraph. It also contains revised ratings for Manulife Financial Capital Trust.)

Fitch Ratings has downgraded the debt and preferred stock ratings of Manulife Financial Corporation (MFC) by one notch. Fitch also assigns an 'A' rating to MFC's CAD1 billion 4.896% notes due 2019 and its 7.768% notes due 2019, and an 'A-' rating to MFC's non-cumulative preferred class 1, series 1 shares. The Rating Outlook is Negative.

In addition, Fitch has affirmed all ratings of MFC's insurance related operating subsidiaries, including Manufacturer's Life Insurance Company (MLI) and John Hancock Life Insurance Company (JHLIC). (See complete list of ratings actions at the end of this release.) The Outlook for all ratings remains Negative.

The one-notch downgrade of MFC's parent company-related ratings reflects Fitch's decision to move to standard notching of parent company ratings relative to insurance company subsidiary ratings. This is primarily as a result of the increased volatility in earnings and capital of the group, declining fixed-charge coverage at the holding company level, and a moderate increase in financial leverage. Earnings before interest and taxes (EBIT) to fixed charges declined to 2.6 times (x) in 2008, from an average of 13.1x for the previous three years ending 2008. Fitch considers MFC's payment capacity to be solid and expects fixed charge coverage in 2009 to range between 6x and 7x in a generally flat equity market scenario.

MFC reported a first-quarter 2009 CGAAP net loss of $1,068 million, driven by $1,401 million in accounting charges to strengthen variable annuity and segregated fund guarantee reserves, $277 million of unrealized losses on alternative asset classes and accruals for credit downgrades and credit impairments of $193 million. As a result, shareholders' equity declined by $1.4 billion, or 15%, in the first three months of 2009.


Fitch's equity-credit-adjusted leverage ratio for MFC increased to 17.4% on a pro forma basis with the recent issuance of debt and preferred stock securities from 16% at year-end 2008 and 10.2% the prior year. Fitch notes that MFC's current bank facility matures in 2013 and has no debt maturities until 2014.

While Fitch views the capitalization of MFC's operating companies as quite strong at March 31, 2009 when measured by risked-based capital metrics, these levels are being challenged due to the recent equity market declines and anticipated increases in actuarial reserve and capital requirements related to the large block of unhedged variable annuity guarantees written before 2008. Fitch does not envision any near-term liquidity problems as the guarantees are not near-term cash claims.

Fitch believes MFC has good financial flexibility and a consistent ability to raise capital to meet potential capital requirements and/or potential acquisition-related needs at the new rating levels through the issuance of debt or additional forms of equity.

The affirmation of MLI and JHLIC and other operating insurance subsidiaries' ratings reflects MFC's strong business and operating profiles and the expected strong level of capitalization in 2009. Additional strengths include MFC's strong North American market positions as a result of increased scale, solid operating performance in domestic individual life insurance, group insurance and retirement, as well as its profitable international insurance businesses in Asia and Japan, which have offset in part the earnings declines in variable annuities and fee-based businesses.

Fitch also believes the strong dividend capacity of MFC's chief operating subsidiary, MLI, is a key support to MFC-related payment of fixed charges and common stock dividends in 2009 and that U.S. insurance operations are less likely to be a significant source of dividends to the parent company, due to the need to maintain statutory capital levels in view of additional potential investment impairments and reserves for variable annuities.

Fitch's Negative Outlook reflects:

--Fitch's view that near-term conditions in the financial markets will likely continue for an extended period, which could cause the company to experience higher-than-expected volatility in its financial results and additional challenges in 2009;

--The potential for higher-than-expected credit related investment losses;

--The potential need to further increase the capital supporting the company's large, unhedged variable annuity business, driven by further declines in equity markets.

Fitch rates the following:

Manulife Financial Corporation:

--CAD1,000 million medium-term note 4.896% due June 2, 2014 'A'';

--CAD350 million 5.60% non-cumulative, rate reset, preferred class 1, series 1 'A-';

--CAD600 million 7.768% medium-term note due 2019 'A'.

Fitch has downgraded the following ratings:

Manulife Financial Corporation:

--Issuer Default Rating (IDR) to 'A+' from 'AA-';

--CAD350 million 4.67% due 2013 to 'A' from 'A+';

--CAD550 million 5.161% due 2015 to 'A' from 'A+';

--CAD450 million 5.505% due 2018 to 'A' from 'A+';

--CAD350 million 4.10% class A, series 1, preferred stock to 'A-' from 'A';

--CAD350 million 4.65% class A, series 2, preferred stock to 'A-' from 'A' ;

--CAD300 million 4.50% class A, series 3, preferred stock to 'A-' from 'A'.

--CAD450 million 6.60% non-cumulative, preferred class A, series 4 to 'A-' from 'A'.

Manulife Finance, L.P.:

--CAD550 million 4.448% fixed/floating senior debentures due 2026 (Manulife Finance Corp. guarantor) 'A' from 'A+';

--CAD650 million 5.059% fixed/floating subordinated debentures due 2041 (Manulife Finance Corp. guarantor) to 'A-' from 'A'.

John Hancock Financial Services:


--IDR to 'A+' from 'AA-'

--Short-term IDR & commercial paper to 'F1' from 'F1+'.

In addition, Fitch affirms the following ratings:

The Manufacturers Life Insurance Company:

--IFS at 'AA'

--IDR at 'AA-'

--CAD550 million subordinated debt 6.24% due 2016 at 'A'.

John Hancock Life Insurance Company (U.S.A.)

--IFS at 'AA'.

The John Hancock Life Insurance Company of New York

--IFS at 'AA'.

John Hancock Variable Life Ins. Co.

--IFS at 'AA'.

John Hancock Life & Health Insurance Company

--IFS at 'AA'.

Manulife Financial Capital Trust

--CAD60 million 6.7% MaCS series A 'A+';

--CAD940 million 7.0% MaCS series B 'A+'.

John Hancock Life Insurance Co.:

--IDR at 'AA-';

--IFS at 'AA';

--US$450 million surplus notes 7.375% due 2024 at A+'

John Hancock Global Funding Ltd.

--Global MTN program at 'AA'.

John Hancock Global Funding II

--Global MTN program at 'AA'.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.





Fitch Ratings, Chicago

R. Andrew Davidson, CFA, +1-312-368-3144

Doug L. Meyer, CFA, +1-312-368-2061

Martha M. Butler, CFA, CLU, +1-312-368-3191

Brian Bertsch, +1-212-908-0549

(Media Relations, New York)

brian.bertsch@fitchratings.com



Source: Fitch Ratings