Manulife Financial Corp. has agreed to buy Boston insurer John Hancock Financial Services Inc. in stock-for-stock merger worth about $15 billion.

Manulife said the proposed merger would create a leading global insurance franchise and the company a market capitalization of $34.7 billion.

If shareholders approve the deal, Manulife will become the No. 2 life-insurance company in North America, and the fifth-largest in the world, with more than 20,000 employees in North America and Asia.

The companies posted a combined annual profit of $2.2 billion last year, and have $333 billion in assets.

Dominic D’Alessandro would remain president and CEO of Manulife. The merged company will have its global headquarters in Toronto.

David D’Alessandro, chairman and CEO of John Hancock, would be chief operating officer of the merged company and oversee the North American insurance business, which would have its headquarters in Boston under the John Hancock banner. He would be named president of the merged company 12 months after the deal closes. He will report to Dominic D’Alessandro.

Dominic D’Alessandro and David D’Alessandro are not related.

Under the terms of the merger, John Hancock common shareholders will receive 1.1853 Manulife common shares for each John Hancock common share, representing a price of US$37.60, a premium of 18.5%, based on unaffected share prices as of Sept. 24, 2003. Manulife intends to invest up to $3 billion for the repurchase of its common shares. Purchases will be made subject to market circumstances and applicable regulatory requirements.

John Hancock’s Canadian subsidiary Maritime Life, headquartered in Halifax, will become part of the integrated Canadian division of Manulife and part of the North American division.

The combined company will market products and services under multiple brands including John Hancock in the U.S. and Manulife in Canada and the U.S.

“We see this as a unique strategic opportunity,” said Manulife’s D’Alessandro, “to combine two exceptionally strong companies into a single, integrated, global market leader whose scale and capital base will drive even greater growth and shareholder value. The benefits of this transaction are many, strengthening our position in each of our core businesses.”

“The merger also enables us to create the largest life insurance company in Canada, and indeed, the second largest in North America,” he added.

The combination of John Hancock’s Asian businesses with Manulife’s strong base in Hong Kong, China, Japan and Southeast Asia will expand the operations to 11 countries and territories, resulting in one of the most extensive life insurance franchises in all of Asia.

Moody’s Investors Service is applauding the planned merger. The rating agency has affirmed the ratings of Manulife’s primary life insurance operating company, and it has also affirmed the ratings of John Hancock. The outlook for all of the ratings is stable.

At the same time, Moody’s has placed the financial strength rating of Maritime Life Assurance Co, John Hancock’s Canadian subsidiary, on review for upgrade.

Moody’s notes that the new, combined entity will have a broad market presence in almost every sizable sector of the U.S. and Canadian life insurance business. “The company will also benefit by having considerable opportunities for expense savings, especially in those business lines that have extensive overlaps. Most of these benefits will occur in Canada, as well as in the US life insurance and variable annuity businesses.”

Moody’s says that it believes scale is crucial in Canada, as the market is extremely concentrated among a few large competitors. “Greater scale in Canada will allow the company to reduce its costs and strengthen its margins. The combined entity’s progress in this regard will be evaluated in the review for upgrade of Maritime Life, the credit profile of which should benefit from the plans for operational and management integration with Manulife’s Canadian operations.”

Moody’s notes that Manulife will not incur any additional debt with the acquisition and financial leverage is approximately 26%, representing a marginal decrease. “The marginal decrease is the result of John Hancock’s somewhat lower financial leverage, offset somewhat by the negative impact on financial leverage from the company’s anticipated use of cash for share repurchase.”

On the downside, Moody’s also believes that the successful execution of this combination is subject to extensive execution risk. However, “Once the execution risks, challenges, and uncertainties arising from the combination are substantially reduced, Moody’s believes there is likely to be positive rating implications for John Hancoc, as the operations become an increasingly integrated core part of the Manulife organization.”