S&P Downgrades MFC

Standard and Poor’s has announced:

Manulife Financial Corp. (MFC) completed its planned subsidiary reorganization on Dec. 31, 2009. Following the close of this transaction, we have lowered the ratings on MFC and John Hancock Financial Services Inc. to ‘A+’ from ‘AA-‘ in order to restore standard notching upon completion of the subsidiary reorganization, because the reorganization reduces MFC’s cash flow diversification. At the same time, we have removed MFC from its CreditWatch listing where it was placed on Nov. 5, 2009.We are also both withdrawing and assigning new ratings on certain subsidiaries and issues to reflect the new group structure and the new rating action on MFC.The outlook on all of these ratings is negative, paralleling the negative outlook on MFC’s higher-rated insurance operating subsidiaries.

This executes the warning discussed in the PrefBlog post MFC: S&P Places Ratings on Watch-Negative, for the reasons discussed there (basically, all of the holdco’s income now comes from a single source and must be approved by a single regulator. Before, it was two sources and two regulators acting independently).

The preferreds remain at P-1(low), presumably because the mapping of the new “A-” global scale for them is still within the P-1(low) bounds of the courser national scale.

Manulife has five issues of preferred shares outstanding: MFC.PR.A (OpRet), MFC.PR.B & MFC.PR.C (PerpetualDiscount) and MFC.PR.D & MFC.PR.E (FixedReset).

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