Understanding the financial health of a life insurance company is the first step to finding the best life insurance policy to protect your family. John Hancock’s financial health puts it in the top tier of insurers. However, in this article, I will cover the financial details that are often overlooked.
In Texas, John Hancock Life Insurance is listed at the 11th largest issuer of life insurance and the 4th largest issuer of annuities. John Hancock Life Insurance was purchased by Manulife of Canada in 2004. As a result, John Hancock operates as a subsidiary of Manulife offering insurance and financial services in the United States. This John Hancock Life Insurance review shows that the company’s financial strength excellent. The following are the financial ratings from five well-established rating services as well as a Comdex Ranking. However, the following information will also cover financial issues not commonly covered in financial rating reports.
John Hancock Life Insurance Highlights
Advice 4 Life Insurance Ranking: 5th for term life insurance
Customer-friendly trend: Vitality rewards program
- A. M. Best Company (Best’s Rating, 15 ratings) A+ (2)
- Standard & Poors (Financial Strength, 20 ratings) AA- (4)
- Moody’s (Financial Strength, 21 ratings) A1 (5)
- Fitch Ratings (Financial Strength, 21 ratings) AA- (4)
- Weiss (Safety Rating, 16 ratings) B(5)
- Comdex Ranking (Percentile in Rated Companies 93
Company ratings indicate how likely a life insurance company can stay in business and pay future benefits. Consequently, financial and safety ratings are important to customers. People that purchase term life insurance want to be assured that the future benefit will be available for their beneficiaries. Additionally, those that buy cash value life insurance have the same concern. However, cash value life insurance policy owners have an interest in the company’s ability to maintain profits that will affect the cash value of their policies.
John Hancock Life Insurance is not one of my recommendations for cash value life insurance for two reasons. First thing to remember is John Hancock is a stock life insurance company. As a result, any excess profit goes back to the Manulife, the parent company. Another type of life insurance company that pays the company profits back to the policyholders is called a mutual life insurance company. As can be seen, if you want a cash value life insurance policy, a whole life insurance company offered by a mutual life insurance company is a better option.
Equally important, the second reason is John Hancock’s primary cash value life insurance policies are universal life insurance and variable life insurance. As an illustration, you will see that these two types of life insurance are mentioned in the section of the class-action settlement of this article. For some people, these policies may be suitable. However, they are very complicated and prone to misunderstanding.
John Hancock Life Insurance review financial assets
To get a better understanding of the profitability of a life insurance company, begin by looking at how they invest their assets. For the most part, life insurance companies traditionally invest their assets conservatively. In general, their primary obligation is to pay death benefits. A conservative approach to managing assets assures that the benefits will be available. In contrast, a life insurance company that invest their general assets aggressively may be able to beat insurance industry averages. However, the same company may lose in the long run because they are putting assets in too risky investments. Or they may lose value because of the general investment markets.
John Hancock Life Insurance holds a very small portion of its assets in stocks, the statement from a VitalSigns report shows only 2.1 % in stocks. Additionally, the majority of the company’s investable assets are in bonds, 63.0 % reported by VitalSigns. Also, 23.6 % is listed as other assets. As a result, those assets are probably in reinsurance.1 Reinsurance is when a life insurance company passes part of its risk of managing assets to a specialty company called a reinsurer. One of the reinsurance companies that John Hancock is using is in bankruptcy. More on this in a moment.
The importance of bonds
Bonds are a critical part of an insurance company’s stability and safety. In light of their significance, the quality of bonds and the length of maturity should be taken into consideration. This John Hancock Life Insurance review shows that 98.7 % of the insurer’s bonds are the highest quality of bonds. Typically, those are considered AAA rated by bond rating agencies.
Additionally, a red flag in analyzing an insurance company’s assets is the percent of non-performing bonds. The reason this is important is non-performing bonds are those that are not paying the interest that they guaranteed. Sometimes this will lead a company to declare bankruptcy. At the date of the last VitalSigns report, John Hancock’s had no non-performing bonds.
John Hancock Life Insurance Review Financial Updates
As of June 27, 2019, A.M. Best has reaffirmed John Hancock’s financial ratings. As I have noted, John Hancock is a subsidiary of Manufactures Life of Canada. So, their financial ratings are part of their parent company ratings. A.M. Best says, “The ratings reflect MFC’s (Manufactures Financial Corporation) balance sheet strength, which AM Best categorizes as very strong, as well as its strong operating performance, favorable business profile and very strong enterprise risk management.”2
Primarily the assets of John Hancock Life Insurance are solid. As can be seen, the strong financial position is validated by the five financial reporting agencies that rate the insurer. As shown above, an issue that could pose as a possible negative to future ratings is John Hancock’s investment in Scottish RE, a reinsurance company. Life insurance companies use reinsurance companies to spread the risk of their insurance business.
Losses can lower earnings
A review of data collected by S&P Global Market Intelligence finds that John Hancock has $40.3 million in paid and unpaid recoverables related to Scottish RE. Given that, Scottish RE was in Chapter 11 for reorganization. Subsequently, they requested that the bankruptcy be changed to Chapter 7 for liquidation. 3 Even so, this is an ongoing issue.
To the everyday person, the $40.3 million is a large sum. However, John Hancock’s admitted assets in 2018 were about $14 billion. Additionally, the insurer reported surplus assets over $1.1 billion. Assumedly, a loss to Scottish RE will only prove to be a drag on earnings for the coming year. The loss should not prove detrimental to life insurance customers.
John Hancock Life Insurance also has two class-action lawsuits that are in the news. These will affect earnings in the coming year. In the first place, the Larson, et al. v. John Hancock Life Insurance Company (U.S.A.) settlement, the insurer agreed to pay nearly $60 million to settle a class-action lawsuit challenging the cost of insurance charges deducted from policyholders’ account values.4
In the second place, in 37 Besen Parkway LLC v. John Hancock Life Insurance Co settlement, the insurer has agreed to a “pay $91.25 million to settle a class-action lawsuit accusing the company of using improper mortality rate calculations that caused consumers to pay inflated rates.”5 In any event, do not let this drag you view of John Hancock down. They are still a good life insurance company.
My opinion is more to do with the type of life insurance. It is not related to the money in the settlements. I would make an educated guess that there are more than these two lawsuits occurring at John Hancock. All things considered, “nearly 90% of US Corporations are engaged in some type of litigation, and the average company balances a docket of 37 lawsuits.”6
My most significant concerns are dealing with the use of universal life insurance and variable life insurance. In particular, the two lawsuits mentioned deal with complex aspects of how the policies function. If that sounds confusing, you are not the only one to have that opinion. By the same token, John Hancock is not the only company to have problems with universal and variable life insurance policies. Several other life insurers have had similar problems. The life insurance policies are complicated.
I do not have any reservations in recommending John Hancock for term life insurance. Subsequently, they are ranked fifth in my 10 Best Life Insurance Companies for Term Life Insurance. I am not a fan of any universal life insurance or any variable life insurance. Due to they are easy for agents to miscommunicate and harder for customers to understand. You can get a quote anytime by clicking here or on the orange quote now button.
John Hancock Life Insurance reviews from customers
No company is perfect. Every company has problems of one sort or another. The key for consumers is to understand where the problems are and determine if the issues may affect them.
Yelp reviews show that John Hancock’s long-term care insurance is a glaring problem.7 In fact, John Hancock has taken steps to improve the service. In 2016, John Hancock Life Insurance withdrew from the long-term care insurance market. At the time, the insurer was one of the larger providers of long-term insurance. However, the problems that people on Yelp are not the only problems with the product.
The United States is approaching a long-term care crisis. In other words, many people need long-term care, and many people that will need long-term care. The problem with insurance products is the concept of long-term care did not have enough claims experience to see what was coming. Consequently, a higher than expected number of people claimed benefits for long-term care insurance. John Hancock could not continue to issue new policies in the same manner as had been done in the past. As a result, they have withdrawn from the market and are focusing on managing the block of long-term care insurance that they have.8
As of September 10, 2019, John Hancock Life Insurance had 42 complaints filed with the Better Business Bureau. In reality, for a company the size of John Hancock, 42 complaints are not a lot.9 In 2017, the company had 104,998 life and annuity policies written in the State of Texas alone, and only zero complaints were made to the Texas Board of Insurance.10 Most of the complaints made to the BBB were administrative in nature. With this in mind, remember that the purpose of reviewing problematic customer reviews is so you can avoid those same problems.
Miscommunication with paperwork is an ongoing problem with any life insurance company. Two things can help reduce administrative issues. First, use a local life insurance agent. Agents are experts at solving paperwork problems. Second, you can solve paperwork problems by including a letter of explanation with your forms. Sometimes a from does not have adequate space to describe the problem you are trying to solve. A letter of explanation can clear problems better. There is one more very important tactic. Only tackle one issue at a time per correspondence. If you try to solve several problems at the same time, you are more likely to have a misunderstanding. Make your written communication simple and to the point. Your agent should help you.
For life insurance customers, John Hancock is not the only life insurance company that deals with the type of issues mentioned. My opinion is that you will not find a perfect life insurance company. As a potential customer, it is up to you to compare the issues that exist at John Hancock with other alternatives available. Weigh your financial needs with your perception of what the insurer offers and make an informed and educated decision.
John Hancock has a long history of excellent service
No John Hancock Life Insurance review would be complete without mentioning the great history of the company. The company was established in 1862. It took its name to signify a sign of stability and strength. The namesake, John Hancock is the first signer of the Declaration of Independence. He also served as the President of the Continental Congress for two years.
Through the 1950s and 1960s John Hancock Life insurance advertised their life insurance services by associating with recognizable sports figures and artist. They ran ads in publications such as Life magazine and the Saturday Evening Post. Here is the advertisement featuring baseball player Babe Ruth.
John Hancock later used the western art of Fredric Remington to advertise the life insurance company. The company no longer uses athletes or artist to promote their life insurance company. However, they still do use the famous image of John Hancock’s signature as a company logo.11
Trends toward the future
John Hancock’s Vitality Life Insurance program is an innovative approach to helping people protect their family with life insurance. Vitality is a new type of life insurance; interactive life insurance. The strategy is to tie a person’s ongoing health to life insurance with monetary incentives. In this program, each customer is offered a smartwatch at a significant discount. The data collected on the smartwatch is communicated to John Hancock. Then, if an insured maintains a certain level of physical activity, they earn monetary incentives.
John Hancock Life Insurance is the first major life insurance company to switch their entire business model to interactive life insurance. “Interactive life insurance is designed to help policy owners live longer lives. Interactive life insurance is like a secret that the rest of the world already knew about, and it is finally introduced to the United States. It is very competitively priced and is more actuarially sound than life insurance sold based on big data.”12
Interactive life insurance is a worldwide trend
Changing an entire business model for a large life insurance company is a bold change for John Hancock. Innovations like interactive life insurance are the type of changes that you are more likely to see from a start-up company or a smaller subsidiary. It appears that John Hancock’s switch to selling interactive life insurance is based on the changes that this type of life insurance has been having in many other parts of the world. Asia, Africa, Canada, and Europe are areas where interactive life insurance has been accepted with tremendous enthusiasm. The key is that life insurance has tapped into something that almost everyone wants, a way to live a longer life. You can get a John Hancock term life insurance quote by clicking here or on the orange quote now button.
1 EbixExchange. (2018). John Hancock Life Insurance life insurer financial analysis (VitalSigns). Johns Creek, GA: VitalSales Suite.
2 A.M. Best Company. “AM Best Affirms Credit Ratings of Manulife Financial Corporation and Its Subsidiaries.” Insurance News & Analysis. Last modified June 27, 2019. http://news.ambest.com/presscontent.aspx?altsrc=9&refnum=28145
3 Zawacki, Tim. “US Life Industry’s Gross Exposure to Rehabilitating Reinsurer Tops $2B.” S&P Global Market Intelligence. Last modified April 8, 2019. https://www.spglobal.com/marketintelligence/en/news-insights/trending/N6kAukaznxQy7cEkdlU6qg2
4 Bucher, Anne. “John Hancock Life Insurance Policy Class Action Settlement.” Top Class Actions. Last modified March 22, 2018. https://topclassactions.com/lawsuit-settlements/closed-settlements/839429-john-hancock-life-insurance-policy-class-action-settlement
5 Bucher, Anne. “John Hancock Settles Life Insurance Class Action for $91M.” Top Class Actions. Last modified July 24, 2018. https://topclassactions.com/lawsuit-settlements/lawsuit-news/852954-john-hancock-settles-life-insurance-class-action-91m/
6 Fulbright Jaworski L.L.P. “Second Annual Litigation Tends Survey Findings.” Fulbright Jaworski L.L.P. Last modified 2005. http://www.fulbright.com/mediaroom/files/FJ0536-US-V13.pdf
7 “John Hancock Financial Services – Waterfront – Boston, MA.” Yelp. Last modified August 5, 2014. https://www.yelp.com/biz/john-hancock-financial-services-boston?osq=John+hancock
8 Hopkins, Jamie. “John Hancock Withdrawing From Long-Term Care Market.” Forbes. Last modified November 11, 2016. https://www.forbes.com/sites/jamiehopkins/2016/11/10/john-hancock-withdrawing-from-long-term-care-market/#db271ec426dc
9 “John Hancock Financial Services, Inc. | Better Business Bureau® Profile.” Better Business Bureau®. Accessed September 10, 2019. https://www.bbb.org/us/ma/boston/profile/insurance-companies/john-hancock-financial-services-inc-0021-442
10 “2018 Life and Annuity Complaint Index.” Texas Department of Insurance. Last modified 2018. https://www.tdi.texas.gov/consumer/documents/cplhci18.pdf
11 “John Hancock | Search Results.” The Pop History Dig | The Pop History Dig is a Website Offering Historical and Topical Stories on Business, Politics, and Popular Culture. Accessed September 10, 2019. http://www.pophistorydig.com/?s=John+Hancock
12 Richards, V. (2018, December 2). Interactive life insurance may help you live longer!