Fitch Rates Manulife's Limited Recourse Capital Note 'BBB-'

(The following statement was released by the rating agency) Fitch Ratings-New York-18 February 2021: Fitch Ratings has assigned a 'BBB-' rating to Manulife Financial Corporation's (MFC) 3.375% C$2 billion Limited Recourse Capital Note (LRCN) Series 1 maturing on June 19, 2081. Key Rating Drivers MFC's LRCN is junior subordinated debt and if a recourse event occurs, which includes nonpayment of principal or interest, the sole recourse for the noteholders is their proportional share of the noncumulative perpetual preferred shares held in a dedicated trust. The notes are rated four notches below MFC's 'A' Long-Term Issuer Default Rating, which reflects Fitch's assumption of "poor" recovery prospects in the event of default, given the level of subordination and two notches for "moderate" nonperformance risk. The rating is aligned with MFC's existing preferred shares and is consistent with how Fitch would rate the preferred shares that the LRCN holders would be entitled to if a recourse event occurs. Proceeds from the issuance will be used for general corporate purposes, including investment in subsidiaries. Fitch will treat the LRCNs as 100% equity in the calculation of financial leverage. Following the issuance, MFC's financial leverage is expected to remain in line with rating expectations. Fitch affirmed the ratings of MFC and its insurance operating subsidiaries with a Stable Outlook on May 7, 2020. For more details, see Fitch's press release at www.fitchratings.com. RATING SENSITIVITIES The rating assigned to the notes is based on MFC's ratings, and as such, is sensitive to any changes to MFC's ratings. Factors that could, individually or collectively, lead to negative rating action/downgrade: --Sustained deterioration in capitalization metrics; --Core earnings deterioration evidenced by ROE measures below 8% and ROA below 65bps; --Core-earnings fixed-charge coverage (FCC) below 6x, with financial leverage and total leverage above 25% and 35%, respectively; --Increase in the risky asset ratio to above 140%; --Large-scale acquisition or divestment that could adversely affect leverage and capitalization measures. Factors that could, individually or collectively, lead to positive rating action/upgrade: --Reduced exposure associated with legacy variable annuity contracts, LTC liabilities and alternative asset classes; --Maintenance of very strong capitalization metrics; --Sustainable core earnings measures evidenced by ROE in excess of 12%; --Stability in reported net income; --Reductions in financial leverage to consistently below 20%; --Improved core-earnings FCC consistently in excess of 10x. Best/Worst Case Rating Scenario International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit [https://www.fitchratings.com/site/re/10111579] REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The principal sources of information used in the analysis are described in the Applicable Criteria. Manulife Financial Corporation ----junior subordinated; Long Term Rating; New Rating; BBB- Contacts: Primary Rating Analyst Jamie Tucker, CFA, CPA Director +1 212 612 7856 Fitch Ratings, Inc. Hearst Tower 300 W. 57th Street New York, NY 10019 Secondary Rating Analyst Douglas Baker, Associate Director +1 312 368 3207 Committee Chairperson Jim Auden, CFA Managing Director +1 312 368 3146 Media Relations: Sandro Scenga, New York, Tel: +1 212 908 0278, Email: sandro.scenga@thefitchgroup.com Jessica Torchia, New York, Tel: +1 212 908 0653, Email: jessica.torchia@thefitchgroup.com Additional information is available on www.fitchratings.com Additional Disclosures Dodd-Frank Rating Information Disclosure Form (https://www.fitchratings.com/site/dodd-frank-disclosure/10152875) Solicitation Status (https://www.fitchratings.com/site/pr/10152875#solicitation-status) Additional Disclosures For Unsolicited Credit Ratings (https://www.fitchratings.com/site/pr/10152875#unsolicited-credit-ratings-disclosures) Endorsement Status (https://www.fitchratings.com/site/pr/10152875#endorsement-status) Endorsement Policy (https://www.fitchratings.com/site/pr/10152875#endorsement-policy) ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. 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