In addition, MFC’s consolidated historical earnings trends have been volatile. This is mainly due to Canadian International Financial Reporting Standards (IFRS), which generally result in more volatile results for interest and equity market sensitive liabilities. 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 on its inforce blocks and is currently only selling de-risked and repriced retail long-term care products at significantly reduced levels. 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 28% of the company’s mortgage portfolio is insured by a federal government agency, Canada Mortgage and Housing Corporation (Canada’s national housing agency). MFC’s leverage continues to be elevated and above target levels partially due to pre-financing activities.A.M. Best believes MFC’s ratings are well positioned at their current rating level for the near to medium term. Key factors that could result in negative rating actions include a significant and sustained decline in MFC’s risk-adjusted capitalization; operating performance that does not meet A.M. Best’s expectations over a sustained period; or difficulty in managing large in-force blocks of interest and equity market sensitive business. For a complete list of Manulife Financial Corporation and its subsidiaries’ FSRs, ICRs and debt ratings, please visit www.ambest.com/press/121810manulife.pdf. The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology. A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com. Copyright © 2013 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.