Dominion Bond Rating Service Ltd. is upgrading its credit ratings on Maritime Life and John Hancock Financial Services Inc., following their acquisition by Manulife Financial Corp.

The ratings were placed “Under Review with Positive Implications” on Sept. 29, 2003. DBRS says that the transaction is viewed as positive for Maritime Life’s debtholders, as Maritime Life will become a member of the much larger Manulife Financial group of companies.

Manulife and John Hancock said today they had completed their deal that will make Manulife the largest life insurer in Canada.

DBRS expects that Maritime Life will be merged into the Canadian operations of Manulife Financial. When this legally occurs, the long-term ratings would be reviewed to consider equating them. DBRS expects that Maritime Life products will be transitioned over time to the Manulife Financial brand, but business processes will be quickly integrated. John Hancock will become a wholly owned subsidiary of Manulife Financial.

DBRS says that the upgrades for John Hancock reflect the strength of the newly merged entity and the belief that while John Hancock is likely to remain a separate legal entity, its board, management, operations, systems, strategy, and facilities will essentially become integrated with Manulife Financial over time.

“However, because of the separate legal status and recognizing that the many integration challenges have yet to be achieved, DBRS ratings for John Hancock entities remain one notch below the AA rating assigned to the deposit notes of Manulife Bank of Canada,” DBRS says. “If integration challenges and other expectations are achieved over time, there is a possibility that DBRS will view the credit profile of John Hancock and Manufacturers Life Insurance Company to be similar.”

“This transaction escalates Manulife Financial into a leadership position among North American life insurance companies and significantly adds to the scale of its U.S. operations. The combination improves Manulife Financial’s already diversified business mix, which includes sizeable reinsurance and Asian divisions. With the addition of John Hancock’s Canadian subsidiary, The Maritime Life Assurance Company, Manulife Financial will also strengthen its Canadian market share in group life and health, individual life insurance, disability insurance, and segregated funds,”the rating agency notes.

It also observes that Manulife Financial enters this merger with very strong levels of capital and cash, and given that the transaction is a share-for-share deal, DBRS “expects capital to remain favourable”.