The Manufacturers Life Insurance Co. and its John Hancock insurance subsidiaries are under review by A.M. Best, with negative implications.

The parent and its companies have strength ratings of A+ (superior) and issuer credit ratings of "aa," but are under review following a $2.4 billion net loss reported by Manulife for the second quarter. That loss was above A.M. Best’s expectations, and was a result of the company’s exposure to declining equity markets and low interest rates in the U.S.

The losses may reverse with improved capital market performance. A.M. Best notes that while the company makes progress, Manulife has a large block of segregated funds, of which nearly half of the guarantee risk is unhedged and contributes to earnings volatility. Also, in the third quarter Manulife has indicated that it is expecting to finish an annual review of all actuarial methods and assumptions that will likely result in a charge related to the company’s long-term care business.

The ratings will remain under review pending further discussions with Manulife regarding its continuing risk mitigation and capital management strategies.