Update: Fitch Rates Manulife Financial Corporation Sr. Debt 'AA-'

2008-07-14 23:49:07 -

- This is a correction for a previous message. It amends the amount of debt issued.

Fitch rates Manulife Financial Corporation's (MFC) senior debt and recently issued C$950 million senior unsecured notes 'AA-'. The proceeds from the new issuance will be used for general corporate purposes, including the investment in subsidiary operations.

The ratings for the senior notes

reflect MFC's and its primary operating insurance subsidiaries' very strong fixed charge coverage, moderate use of financial leverage, strong profitability, diversified revenues and earnings capacity and a high credit investment portfolio with only modest exposure to Alt-A and sub-prime residential mortgages.

Fitch's rating concerns include the growing significance of risk exposures to equity-linked products and products with secondary guarantees and the very competitive markets within which MFC operates.

Fitch estimates MFC's equity-credit-adjusted will remain within rating expectations, although financial leverage will increase moderately on a pro forma basis to approximately 13.7% (15.5% when adjusted for 50% of goodwill) at June 30, 2008 versus 11.6% (12.7% when adjusted for 50% of goodwill) at December 31, 2007.

For 2008 Fitch expects financial leverage to remain moderate and below 15% on a Fitch equity-adjusted basis. Run rate fixed-charge coverage is considered very strong on a Canadian GAAP EBIT coverage basis and is expected to exceed 15 times (x) for 2008.

Fitch expects risk adjusted capital will be maintained at current very strong levels and that MFC is likely to continue to deploy excess capital through moderate levels of stock repurchases and with opportunistic block or company acquisitions.

Fitch rates the following MFC debt 'AA-':

--C$550 million 5.161% due 2015;

--C$400 million 5.505% due 2018.

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'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, 312-368-3144
Martha M. Butler, CFA, CLU, 312-368-3191