Fitch Ratings has announced that it:
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.
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.
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.
It was very recently that Fitch rated MFC Prefs at A with a negative outlook. These are fast changes for the credit rating!
Fitch rates SLF Prefs at BBB+ and GWO prefs at A … so beer tonight all ’round at GWO headquarters – they’re a notch better in Fitch’s view, at any rate!
MFC has the following issues outstanding: MFC.PR.A (OpRet), MFC.PR.B & MFC.PR.C (PerpetualDiscount) and MFC.PR.D & MFC.PR.E (FixedReset). All are tracked by HIMIPref™
The MFC credit was last mentioned on PrefBlog when Moody’s downgraded the “Insurer Financial Strength”.