AM Best Comments on Credit Ratings of Manulife Financial Corporation and Its Subsidiaries Following Reinsurance Agreement Announcement With Venerable Holdings Inc.
19 November 2021 - 6:16AM
Business Wire
AM Best has commented that the Credit Ratings (ratings)
of Manulife Financial Corporation (MFC) (Toronto, Canada) [NYSE:
MFC] and its subsidiaries remain unchanged following the Nov. 15,
2021, announcement that the company has entered into an agreement
to reinsure a significant portion—more than 75%—of
its legacy U.S. variable annuity (VA) block to Venerable Holdings
Inc. The block consists mainly of policies with guaranteed minimum
withdrawal benefit riders. The reinsurance deal is expected to
close during first-quarter 2022.
The transaction is in line with MFC’s previously announced
strategy of identifying opportunities to de-risk its liability
profile by transferring all or a portion of higher risk and more
capital-intensive businesses to third parties, as well as pursuing
other internal measures to improve business performance. AM Best
believes that MFC’s reinsurance agreement with Venerable Holdings
Inc. is a net positive as it is expected to release a significant
amount of capital and allow the company to redeploy that capital
into its other higher growth and less capital-intensive businesses,
as well as reduce its exposure to equity market volatility and
interest rate sensitivity. While MFC has announced that it will
increase share repurchases to offset the loss in earnings per
share, AM Best notes that overall capitalization, as measured by
Best’s Capital Adequacy Ratio (BCAR), remains strong.
Upon closing, the transaction is expected to positively benefit
capital by approximately $2.0 billion, including a one-time
increase in net income of $750 million, and will reduce U.S. VA net
amount-at-risk by approximately 75%, as well as generate a 54%
reduction, excluding the impact from the company’s hedges, in the
company’s equity market sensitivity from VA guarantees.
This press release relates to Credit Ratings that have been
published on AM Best’s website. For all rating information relating
to the release and pertinent disclosures, including details of the
office responsible for issuing each of the individual ratings
referenced in this release, please see AM Best’s Recent Rating
Activity web page. For additional information regarding the use and
limitations of Credit Rating opinions, please view Guide to Best's
Credit Ratings. For information on the proper use of Best’s Credit
Ratings, Best’s Preliminary Credit Assessments and AM Best press
releases, please view Guide to Proper Use of Best’s Ratings &
Assessments.
AM Best is a global credit rating agency, news publisher and
data analytics provider specializing in the insurance industry.
Headquartered in the United States, the company does business in
over 100 countries with regional offices in London, Amsterdam,
Dubai, Hong Kong, Singapore and Mexico City. For more information,
visit www.ambest.com.
Copyright © 2021 by A.M. Best Rating
Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.
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Shauna Nelson Senior Financial Analyst +1 908
439 2200, ext. 5365 shauna.nelson@ambest.com
Christopher Sharkey Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com
Michael Adams Associate Director +1 908 439
2200, ext. 5133 michael.adams@ambest.com
Jim Peavy Director, Communications +1 908 439
2200, ext. 5644 james.peavy@ambest.com
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