Standard & Poor’s Ratings Services has affirmed the ratings on Manulife Financial Corp. and its subsidiaries. At the same time, S&P has revised the outlook on the Manulife to positive from stable.

In a release, S&P said that the change in outlook is being made to, “reflect the breadth and depth of the business franchise, its dominant position in its primary product markets, the stability and level of the earnings performance of the group, and the extremely strong capital adequacy position of its regulated operating subsidiaries.”

The insurer financial strength ratings are due to “the group’s very strong and geographically diversified business positions in Canada, the U.S., and Asia; extremely strong capitalization; solid operating performance; and accomplished management team.” The rating agency notes that Manulife now represents one of the top insurance organizations in Canada (top three), North America (top five), and globally (top 10), as measured by assets.

“Some factors, although negative, are either well managed or limited in their consequence, including exposures to global equity markets that could affect Manulife Financial’s wealth management businesses and investments against surplus if these markets soften,” said Standard & Poor’s credit analyst Donald Chu. Other rating factors include the effect of the devaluated U.S. dollar against the Canadian dollar, which is Manulife’s reporting currency; its emerging markets exposure; and the residual integration and operational risk associated with the completion of the John Hancock integration.

S&P noted that a somewhat higher risk profile exists in John Hancock’s institutional spread-based businesses, long-term care business, and bond investment portfolio (although management has taken steps to de-risk these businesses). “Finally, the acquisition of John Hancock had a negative affect on the company’s quality of capital due to the goodwill and intangibles created,” it added.

S&P said that Manulife has a positive outlook with the expectation that operating earnings will continue to improve. “To the extent that Manulife successfully integrates the John Hancock acquisition as planned and the company improves its already very strong operating performance, business franchise, and capital adequacy position, the ratings will be reviewed for an upgrade.”

“In addition, although the company’s enterprise risk management function is very robust, Manulife Financial needs to demonstrate that it has fully reviewed and accounted for the risk associated with some of the more complex insurance products that it has developed for sale in the North American market (such as variable annuities, long-term care, and universal life products) in order for Standard & Poor’s to consider a higher rating,” it added.

“Alternatively, any significant residual integration issues with the John Hancock acquisition or unexpected disruptions to earnings would cause the outlook to be revised to stable,” it said. Standard & Poor’s expects to bring a resolution to the positive outlook within a 12-month window.