A.M. Best Co. has affirmed the financial strength ratings (FSR) of A+ (Superior) and issuer credit ratings (ICR) of "aa-" of the life insurance subsidiaries of Manulife Financial Corporation (MFC) (Toronto, Canada) [NYSE: MFC]. Concurrently, A.M. Best has affirmed the ICR of “a-” as well as all existing debt ratings of MFC. The outlook for all ratings is stable. (See link below for a detailed listing of the companies and ratings.) The rating affirmations reflect Manulife's solid market position in the global markets, continuing progress in de-risking its balance sheet by reducing its exposure to equity and interest rate risks, and its revised product focus on less capital intensive lines of business while maintaining adequate regulatory risk-adjusted capitalization, despite low interest rate challenges and restructuring of its business platform. MFC also maintains significant scale in its core business lines and has seen growing assets under management. A.M. Best notes MFC’s proactive risk management platform including enhanced risk oversight functions. Over the last few years, MFC's various strategic actions have moderated the impact of the macro-economic challenges and equity market volatility on its consolidated risk profile and balance sheet. Key strategic actions have included accelerated macro and dynamic hedging programs, changes in product design and pricing and the targeting of specific products for growth in its various geographical markets while reducing the sales of capital intensive products, especially variable annuities in the United States. A.M. Best remains concerned with MFC’s significant in-force exposure to equity market and interest rate risk, particularly within its insurance segments, reduced interest coverage and somewhat elevated financial leverage. Despite discontinuing sales of U.S. variable annuities, largely written though John Hancock Life Insurance Company (U.S.A.), A.M. Best believes that MFC will continue to face challenges in managing its large book of in-force business given the persistently low interest rate environment and equity market uncertainty. In addition, MFC’s consolidated earnings have remained volatile due to unfavorable reserve adjustments for actuarial assumption changes, largely related to current interest and equity market conditions. Canadian International Financial Reporting Standards (IFRS) generally result in more volatile results with changing equity values and interest rates relative to U.S. GAAP. On a U.S. GAAP basis, he company’s results were more favorable. A.M. Best also remains concerned over MFC’s long-term care book of business, currently written through John Hancock Life Insurance Company (U.S.A.), but notes that the company continues to make progress in achieving its targeted price increase approvals. In addition, MFC's exposure to real estate, through direct mortgage loans and commercial real estate, remains high as a percentage of total invested assets. A.M. Best recognizes that the direct mortgage loans have been conservatively underwritten with low loan-to-values and high debt service coverage ratios and continue to have low amounts in arrears. In addition, approximately one-third of the company’s mortgage portfolio is insured by a federal government agency, Canada Mortgage and Housing Corporation (CMHC) (Canada’s national housing agency).