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Rating Action: Manulife (Affirmation) Rating Actions: AXA Equitable

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Rating Action: Manulife (Affirmation) Rating Actions: AXA Equitable DUE CARE UPDATE June 8, 2017 Rating Action: Manulife (Affirmation) On May 25, A.M. Best affirmed the ‘A+’ (Superior) financial strength ratings of the life insurance subsidiaries of Manulife Financial Corp., including John Hancock Life Insurance Co. (USA). The outlook for the ratings is stable. According to A.M. Best, the affirmation reflects Manulife’s solid risk-adjusted capitalization, strong liquidity profile, and strong growth in Asia, Canada, and the U.S. A.M. Best noted the ratings are also driven by growth in operating earnings in the past five years, increased scale of primary business lines, and growth in net flows and fee-based revenues, especially in Asia. Partially offsetting these positive factors in A.M. Best’s opinion are increased investment risk relative to capital regarding Manulife’s alternative asset portfolio, and Manulife’s retention of a large block of variable annuities that are subject to market volatility and interest rate risk. Rating Actions: AXA Equitable (Downgrade) On May 10, AXA SA (AXA) announced that it intends to pursue a partial IPO of its U.S. life insurance unit AXA Financial Inc., which includes AXA Equitable Life Insurance Co. Following the announcement, rating agencies commented on the impact of the proposed IPO and shared their views of AXA Equitable’s ratings. A.M. Best On May 11, A.M. Best downgraded the financial strength rating to ‘A’ (Excellent) from ‘A+’ (Superior) of AXA Equitable, with a stable outlook. According to A.M. Best, the downgrade is a result of its view that AXA’s U.S. life business is no longer seen as strategically important to the group. A.M. Best expects that U.S. life operations will realize a future decline in support from the parent company, and noted that further reduction in perceived support could result in another negative rating action. Fitch Ratings On May 10, Fitch Ratings downgraded the insurer financial strength rating to ‘A+’ (Strong) from ‘AA-’ (Very Strong) for AXA Equitable. The rating has been placed on negative watch. According to Fitch, the downgrade is based on its expectation that the Paris-based parent company’s support of AXA Equitable will decline in the future, since it perceives the U.S. life business to no longer be considered a core operation. Moody’s Investors Service On May 11, Moody’s Investors Service downgraded the insurance financial strength rating of AXA Equitable to ‘A1’ (Good) from ‘Aa3’ (Excellent), with a negative outlook. According to Moody’s, the downgrade is based on the implied diminished support from the parent company. DUE CARE UPDATE June 8, 2017 Standard & Poor’s On May 10, Standard & Poor’s downgraded the financial strength rating to ‘A+’ (Strong) from ‘AA-’ (Very Strong) for AXA Equitable. The outlook is stable. According to S&P, the downgrade is based on its belief that AXA’s U.S. life business is no longer core to the parent company’s overall success. Additionally, S&P stated that the parent company’s support of, and stake in, AXA could decline gradually in the future. Rating Actions: Brighthouse (Downgrade) On May 31, Fitch Ratings downgraded the insurer financial strength ratings of the insurance operating companies of Brighthouse Financial, Inc. (Brighthouse) to ‘A’ (Strong) from ‘A+’ (Strong), with a stable outlook. According to Fitch, the downgrade reflects a deterioration of Brighthouse’s projected capitalization compared to those of Fitch’s expectations. Specifically, Fitch mentioned the funding of assets in support of the company’s variable annuity business and overall levels of statutory capital as key factors of the rating action. Brighthouse’s financial leverage is also moderately higher than Fitch had projected. Fitch noted that the current ratings reflect recent operating performance and management targets related to capitalization upon completion of Brighthouse’s impending separation from MetLife. Fitch said the combined risk-based capital (RBC) ratio of Brighthouse’s operating companies was 525% at year-end 2016 and it expects the company to operate at this level under normal conditions for the foreseeable future. Rating Action: Aegon (Outlook Revision) On May 5, A.M. Best affirmed the financial strength rating of ‘A+’ (Superior) and revised the outlook to negative from stable for Aegon N.V. and its U.S. life subsidiaries, including Transamerica Life Insurance Co. According to A.M. Best, the revision is due to the deterioration of the credit profile of the parent holding company, Aegon, and its ability to sustain current rating fundamentals due to the challenging operating environment facing life insurers. A.M. Best also notes that Aegon continues to focus on sales of variable annuities, which A.M. Best views as having more risk than other financial products. A.M. Best says the financial strength affirmation reflects Aegon’s strong business profile, adequate risk-adjusted capitalization, and its underlying trend of favorable profitability, though there is some volatility given its asset and liability composition. Rating Action: AIG (Affirmation) On May 24, A.M. Best affirmed the ‘A’ (Excellent) financial strength rating of the insurance subsidiaries of American International Group, Inc. (AIG), with a stable outlook. DUE CARE UPDATE June 8, 2017 According to A.M. Best, the rating was affirmed because of the group’s improved risk-adjusted capitalization, consistently favorable earnings from core business lines, and leading positions within a number of market segments, including non-profit and individual retirement markets. A.M. Best also noted that AIG has a very broad product mix and diversified distribution platform. A.M. Best said that offsetting factors include earnings pressure on its large block of interest- sensitive business, significant parental dividend payouts, and exposure to higher risk asset classes. Additionally, premium declined in 2016 due to the impending Department of Labor fiduciary rules that will affect the qualified marketplace. Rating Action: Minnesota Life (Affirmation) On May 9, Fitch Ratings affirmed the ‘AA’ (Very Strong) insurer financial strength rating of Minnesota Life Insurance Co. The rating outlook is stable. According to Fitch, the affirmation reflects the Minnesota Life’s extremely strong balance sheet, conservative risk profile, stable earnings, as well as its strong position in the group life insurance market. Fitch views Minnesota Life’s operating leverage and financial leverage to both be among the lowest in the industry. Fitch expects low interest rates will continue to affect Minnesota Life’s profitability, and notes that large capital market declines could have a sizeable impact since the company has significant separate account liabilities. Rating Action: Athene (Affirmation) On May 23, Fitch Ratings affirmed the ‘A-’ (Strong) insurer financial strength rating of Athene Annuity and Life Assurance Co. (Athene). The rating outlook is stable. According to Fitch, the affirmation reflects Athene’s very strong financial performance and earnings, very strong capital position, lack of financial leverage, and leadership in the fixed annuity market. Fitch states the ratings are also affected by Athene’s relatively narrow product profile and somewhat aggressive investment portfolio. Fitch notes that clarification around the impending Department of Labor rules governing the sale of fixed-indexed annuities could have a positive impact on Athene’s credit profile. Aegon Divests U.S. Life Run-Off Units to Wilton Re On May 23, A.M. Best reported that Aegon N.V. will sell its two largest U.S. run-off businesses to Wilton Re to release $700 million of capital. The two businesses—a payout annuity business and a BOLI/COLI business—are part of the Transamerica Life Insurance Co. unit. DUE CARE UPDATE June 8, 2017 A.M. Best noted that Wilton Re will assume $14 billion of general and separate account liabilities through reinsurance agreements with Transamerica subsidiaries. Additionally, A.M. Best said that Aegon’s expected decrease in annual capital generation will be $30 million. Moody’s Reports Marginal Increase in Investment Risk Will Not Hurt Life Insurers’ Investment Portfolio Credit Quality On May 31, Moody’s Investors Service stated that increased investment risk in U.S. life insurer portfolios over the past few years has been marginal, and credit qualities remain stable. U.S. life insurers have been slowly increasing investment risk to offset low interest rates and provide higher yields. Despite the increased risk, portfolios remain broadly conservative, with shifts toward less liquid investments. Moody’s also noted that industry exposure to alternative assets has also declined modestly, leading to a more stable portfolio. A complete summary of M Carrier financial strength ratings can be found at the end of this update. M Financial Group will continue to monitor and evaluate developments relating to M Carriers and the industry as a whole. If you have any questions or comments, please contact any member of the M Product Management team at 800.656.6960. DUE CARE UPDATE June 8, 2017 M Financial Carriers Summary of Financial Strength Ratings (June 7, 2017) A.M. Best M Carrier FSR Description Category Outlook Eff Date John Hancock A+ Superior 2nd of 15 Stable 5/25/2017 Nationwide A+ Superior 2nd of 15 Stable 7/7/2016 Pacific Life A+ Superior 2nd of 15 Stable 1/6/2017 Prudential A+ Superior 2nd of 15 Stable 9/2/2016 TIAA A++ Superior 1st of 15 Stable 6/8/2016 UNUM A Excellent 3rd of 15 Stable 4/7/2017 Lincoln National A+ Superior 2nd of 15 Stable 12/13/2016 Symetra
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