Standard & Poor’s Ratings Services today said it raised the ratings on Manulife Financial Corp. (Manulife Financial) and its operating insurance subsidiaries by one notch, raising the counterparty credit rating on Manulife Financial to ‘AA’ from ‘AA-’.

The financial strength ratings on Manulife Financial’s key Canadian, U.S., Hong Kong, and Japanese operating subsidiaries: The Manufacturers Life Insurance Co., John Hancock Life Insurance Co., John Hancock Variable Life Insurance Co., Manulife Insurance Co/, John Hancock Life Insurance Co. (U.S.A.), John Hancock Life Insurance Co. of New York, Manulife (International) Ltd., and Manulife Life Insurance Co. Ltd. were raised to ‘AAA’ from ‘AA+’. The outlook is stable.

As a result of this rating action, the operating insurance subsidiaries of Manulife Financial now belong to the small and exclusive group of life insurance operating companies that have a ‘AAA’ financial strength rating. There are only six life insurance groups in North America with ‘AAA’ ratings.

“The upgrade reflects the group’s leading and well-diversified business positions in Canada, the U.S., Hong Kong and other countries within the Asia Pacific rim; the high quality and consistent operating performance; very strong and well-diversified investment portfolio; the extremely strong capital adequacy position; and an excellent enterprise risk management framework,” said Standard & Poor’s credit analyst Donald Chu. “In the past year, Manulife continued to perform at superior levels relative to peers on the basis of sales, revenues, and earnings,” he added. The combined organization represents one of the top life insurance organizations in Canada (top three), North America (top five as measured by market capitalization and total assets) and globally (top five, as measured by market capitalization).

Partially offsetting these strengths is the comparatively high exposure to the global equity markets that could affect Manulife Financial’s wealth management businesses as well as the value of its equity investments. In addition, competition in many of the firm’s business lines remains high, which creates the potential for greater price competition, higher risk products, and lowered standards. To a large degree, Manulife Financial has been able to side-step irrational business practices given the diversity of its business opportunities.

The stable outlook on Manulife Financial and its rated subsidiaries reflects S&P’s expectation that this group will continue to maintain its extremely strong operating performance, business franchise, and capital adequacy position. Given Manulife Financial’s relatively higher risk business profile compared with the existing ‘AAA’ rated insurers, S&P expects the firm to maintain excellent enterprise risk management. The investment portfolio is expected to remain well diversified with minimal asset quality issues, and revenue growth and financial leverage are expected to remain at levels that are supportive of the current ratings.