OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has affirmed the financial strength rating of A+ (Superior) and the issuer credit ratings (ICR) of “aa” of The Great-West Life Assurance Company (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 Great-West Life & Annuity Insurance Company of New York (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). 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 by product and geography, strong market position in its core business lines, solid regulatory capital levels and the financial strength and support of its ultimate majority shareholder, Power Corporation of Canada. Additionally, the Great-West Life Group has continued to achieve significant and sustainable scale advantages in its core business lines in Canada and the United States through strategic acquisitions. Given Great-West Life Group’s diversified insurance, reinsurance and financial services operations, along with its strong enterprise risk management capabilities, the impact it has experienced from volatile market conditions and low interest rates has been relatively modest.
The ratings also consider Lifeco’s adjusted financial leverage position, which continues to remain within its targeted range. The organization has consistently generated significant cash flows from operations and has historically demonstrated its ability to manage its financial leverage and interest coverage 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 insurance lines, 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 further diversification derived from the European business segments, which includes the recent acquisition of Irish Life Assurance plc. In addition, Lifeco maintains an excellent liquidity posture supported by high quality investments, credit facilities and stable sources of earnings.
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 significant competitive advantage.
In the United States, GWL&A is a well-established player with considerable strength in the public and non-profit financial services sector and provides a stable source of earnings for Lifeco. Once the recently announced acquisition of J.P. Morgan Retirement Services’ large-market record keeping business closes, GWL&A will have a number two ranking among defined contribution providers based upon the number of participants. CLAC, which operates in Canada as well as Europe, is among the top 20 life insurers in the United Kingdom, with an industry-leading 30% market share in the group life market.
The economic events experienced in recent years have pressured Great-West Life Group's overall operating performance, although the group’s life insurance entities have not experienced the same level of earnings sensitivity from equity market volatility as its competitors. In addition, A.M. Best expects that the group will continue to face challenges associated with growth in its core U.S. business segments due to the highly competitive environment, as well as continued losses from Putnam Investments. As the global economy and regulatory environment evolves, A.M. Best expects any potential growth strategies will require a more stringent focus and a longer time horizon to record meaningful growth over the medium to longer term.
A.M. Best believes that upward rating movement for the Great-West Life Group is unlikely over the near to medium term. 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 and/or financial leverage 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’ financial strength, issuer credit and debt ratings, please visit www.ambest.com/press/070303greatwest.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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