OLDWICK, N.J.--(BUSINESS WIRE)--International Financial Reporting Standards (IFRS) net income for the four largest publicly traded Canadian life insurance companies—Manulife Financial Corporation; Sun Life Financial Inc.; Great-West Lifeco Inc.; and Industrial Alliance Insurance and Financial Services, Inc.—remained favorable despite a slight year-over-year decrease in total earnings in 2015, due primarily to the mark-to-market impact of securities with exposure to the energy sector.
The Best’s Special Report, titled, “Canadian Life Insurance Industry Year-End 2015 Earnings and Regulatory Update,” states that the companies with large investment exposures to the oil and energy sector were negatively impacted in 2015 by impairments due to the volatility in oil prices during the period. Additionally, downgrades for the sector arose in the first quarter of 2016 as well. Overall operating earnings for the industry remain strong as underwriting performance has been generally favorable, despite some pockets of poor performance for certain blocks such as disability income. Net income also benefited from favorable international foreign currency translation, as there is a translation benefit from the weakening of the Canadian dollar when accounting for international business with foreign currency compared with the prior period exchange rates. The industry also has benefited from growth in asset management business and international expansion.
Growth remains a challenge for the four companies as net premiums written increased modestly by 4.3% in 2015 compared with 4.1% in 2014. Product re-pricing also has continued due to low interest rates and unfavorable policyholder behavior in products such as disability income and long-term care.
Positive market performance and the focus on less capital-intensive, and more fee-driven, retirement products has led to strong growth in assets under management, which increased 18.9% in 2015 for the four insurers.
On the heels of regulatory changes, the Canadian life insurance industry remains well-capitalized as many insurers have remained conservative with their capital strategies until the full impacts of regulatory changes are better known. As volatility in commodity markets such as oil and gas, the weakening of the Canadian dollar and the Bank of Canada’s reduction in the overnight rate have led to economic challenges for Canada, many insurers continue to seek opportunities globally to grow and diversify.
To access a copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=248324.
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