Fitch Assigns 'AA' Rating to Canada Life International Re Limited; Outlook Stable

CHICAGO--()--Fitch Ratings has assigned an Insurer Financial Strength (IFS) rating of 'AA' to Canada Life International Re Limited (CLIRe). A full list of rating actions follows at the end of this release. The Rating Outlook is Stable.

Fitch views CLIRe as 'core' to its ultimate parent, Great-West Lifeco Inc. (GWO) as defined in the agency's Insurance Rating Methodology. As such, Fitch has taken a group approach and set the ratings of CLIRe at the same level as the other GWO group members.

KEY RATING DRIVERS

Fitch believes CLIRe is a key and integral part of GWO's business. GWO acquired CLIRe's parent company, Canada Life Financial Corporation, in July 2003. CLIRe has been part of GWO's reinsurance segment since that time. Overall, the reinsurance segment's earnings have been very stable over the past five years and represent approximately 10% of GWO's total earnings. GWO is among the top 10 life reinsurers in the U.S.

CLIRe shares common oversight, back-office functions, accounting, information technology and other systems with other GWO group members. Additionally, CLIRe has entered into agreements with other members of GWO to reinsure life, annuity and unitized with profits business. CLIRe is domiciled in Ireland, where GWO has other operations, including Irish Life Group Limited.

CLIRe's capitalization is very strong and the company is Solvency II compliant. As such, Fitch does not expect CLIRe will require additional capital from GWO in the near to intermediate term, but views capital fungibility for Canadian lifecos as very high and GWO has demonstrated its willingness and ability to support its subsidiaries in the past.

Fitch affirmed the ratings of GWO and its insurance operating subsidiaries with a Stable Outlook on Jan. 25, 2016.

RATING SENSITIVITIES

Key rating triggers for CLIRe's ratings that could lead to a downgrade include:

--A change in Fitch's view of CLIRe's strategic importance to GWO.

Key rating triggers for GWO's ratings that could lead to an upgrade include:

--Significant improvement in Putnam's earnings to a level on par with GWO's other operating subsidiaries.

--Decline in financial leverage to below 15% and a decline in total leverage to below 25%.

Key rating triggers for GWO's ratings that could lead to a downgrade include:

--A sustained drop in the company's risk-adjusted capital position with no plans or ability to rectify. This would include the U.S. risk-based capital ratio falling below 400% and MCCSR ratios falling below 200%.

--Increase in financial leverage to over 25% or an increase in total leverage to over 35%.

--Decline in fixed charge coverage to less than 6x.

--Sizable goodwill impairment on Canada Life, London Life or Irish Life acquisitions.

--Acquisitions outside GWO's historical risk preferences or expertise, or any other material changes in risk appetite for the company.

--Reduction in Power Financial Corporation's ownership stake in GWO.

FULL LIST OF RATING ACTIONS

Fitch has assigned the following rating with a Stable Outlook:

Canada Life International Re Limited

--IFS 'AA'.

Additional information is available on www.fitchratings.com

Applicable Criteria

Insurance Rating Methodology (pub. 17 May 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=881564

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1005918

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1005918

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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Contacts

Fitch Ratings, Inc.
Primary Analyst
Tana M. Higman
Director
+1-312-368-3122
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Secondary Analyst
Jamie R. Tucker, CPA
Associate Director
+1-212-612-7856
or
Committee Chairperson
Keith M. Buckley, CFA
Managing Director
+1-312-368-3211
or
Media Relations
Hannah James, + 1-646-582-4947
hannah.james@fitchratings.com

Contacts

Fitch Ratings, Inc.
Primary Analyst
Tana M. Higman
Director
+1-312-368-3122
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Secondary Analyst
Jamie R. Tucker, CPA
Associate Director
+1-212-612-7856
or
Committee Chairperson
Keith M. Buckley, CFA
Managing Director
+1-312-368-3211
or
Media Relations
Hannah James, + 1-646-582-4947
hannah.james@fitchratings.com