OLDWICK, N.J.--()--A.M. Best Co. has affirmed the financial strength rating of A+ (Superior) and issuer credit ratings (ICR) of “aa” of The Great-West Life Assurance Company (GWL) (Winnipeg, Manitoba) and its affiliates, London Life Insurance Company (London, Ontario), The Canada Life Assurance Company (CLAC) (Toronto, Ontario), Great-West Life & Annuity Insurance Company (GWL&A) (Greenwood Village, CO) and First Great-West Life & Annuity Insurance Company (White Plains, NY) (together referred to as the Great-West Life Group). Concurrently, A.M. Best has affirmed the ICR of “a” and the existing debt ratings of Great-West Lifeco, Inc. (Lifeco) (Winnipeg, Manitoba). Additionally, A.M. Best has assigned a debt rating of “bbb+” to the recently announced CAD 200 million 5.15% non-cumulative first preferred shares, Series Q of Lifeco. The outlook for all ratings is stable. (See link below for a detailed listing of the companies and ratings.)
The rating affirmations reflect Great-West Life Group’s highly diversified earnings profile, strong market position in its core business lines, its demonstrated financial flexibility, geographic diversification and the financial strength and support of its ultimate majority shareholder, Power Corporation of Canada. Additionally, the Great-West Life Group over time has achieved significant and sustainable scale advantages in its core business lines in Canada and the United States through strategic acquisitions. Additionally, given Great-West Life Group’s diversified insurance, reinsurance and financial services operations, along with its strong enterprise risk management capabilities, the impact experienced from the turbulent global market conditions in recent years was relatively modest.
The ratings also consider Lifeco’s financial leverage position, which remains within A.M. Best’s expectations. The organization has generated significant cash flows from operations and has historically demonstrated its ability to manage its leverage position within A.M. Best’s expectations for its current ratings.
Moreover, A.M. Best recognizes Great-West Life Group’s consolidated position as a market leader in the Canadian individual and group areas, with superior market positions in the wealth accumulation and protection segments, stable earnings contributions from its U.S. operations as it grows its retirement savings business and enhanced opportunities for further diversification derived from its international business segments. These factors contributed to Lifeco’s ability to service its debt. In addition, Lifeco maintains an excellent liquidity posture supported by high quality investments and stable sources of earnings, resulting in solid coverage ratios.
The Great-West Life Group’s leading market position in Canada has remained strong over the years, while its conservative pricing discipline and low expense structure enable it to generate favorable operating results. Moreover, the Canadian distribution systems of Lifeco and its operating companies represent the largest in Canada and serve as a competitive advantage and a major strength.
In the United States, GWL&A is a well established player with considerable strength in the public and non-profit financial services sector, with a number four ranking among defined contribution providers based upon the number of participants, providing a stable source of earnings for Lifeco. In the European segment, CLAC is among the top 20 life insurers in the United Kingdom, including an industry leading 30% market share in the group life market. CLAC also maintains a 5% share of the Irish life assurance and pension market.
A.M. Best expects that the Great-West Life Group will continue to face challenges associated with growth in its core U.S. business segments, as well as expansion opportunities in Canada’s highly competitive marketplace. As the global economy evolves, A.M. Best expects any potential growth strategies will require a more stringent focus and a longer time horizon to record meaningful growth in the medium to longer term.
A.M. Best believes the ratings for the Great-West Life Group has a limited upside in the near term given its current rating level. Key factors that could result in negative rating actions include a significant and sustained decline in the organization’s risk-adjusted capitalization; operating performance that does not meet A.M. Best’s expectations over a sustained period or financial leverage and/or interest coverage that falls materially short of the guidelines for its current rating level.
For a complete listing of Great-West Lifeco, Inc. and its subsidiaries’ FSRs, ICRs and debt ratings, please visit www.ambest.com/press/070508greatwest.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.
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