AM Best Affirms Credit Ratings of Great-West Lifeco, Inc. and Its Subsidiaries

OLDWICK, N.J.–(BUSINESS WIRE)–AM Best has affirmed the Financial Strength Rating of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aa” of The Great-West Life Assurance Company (Winnipeg, Manitoba) and its affiliates. Concurrently, AM Best has affirmed the Long-Term ICR of “a” and the Long-Term Issue Credit Ratings (Long-Term IR) of Great-West Lifeco, Inc. (Lifeco) (Winnipeg, Manitoba). The outlook of these Credit Ratings (ratings) is stable. (See below for a detailed listing of the affiliates and Long-Term IRs.)

The ratings of Lifeco’s operating companies reflect their balance sheet strength, which AM Best categorizes as strongest, as well as its strong operating performance, very favorable business profile and appropriate enterprise risk management.

The group’s balance sheet strength remains solid and its risk-adjusted capitalization remains very strong, as measured by Best’s Capital Adequacy Model, despite the recent substantial issuer bid, which utilized $1.3 billion of dividends from the operating companies and $700 million of holding company cash to repurchase approximately 59.7 million shares or 6% of the outstanding float. AM Best notes that the absolute level of capital and surplus has increased steadily over the past five-year period due to the retention of favorable earnings, and that approximately $530 million of capital has been made available as a result of the sale of its U.S. individual life insurance and annuity business to Protective Life Insurance Company, which closed in June. Overall balance sheet strength also benefits from steady and significant operating cash flows, moderate financial leverage, the appropriate use of reinsurance and a very liquid and high quality investment portfolio comprised of over 70 percent fixed-income investments of which approximately 100 percent are investment grade.

While the group has experienced some competitive pressures in certain market segments, including the par whole life market in Canada, Lifeco maintains leading market positions in its core business lines and overall premiums and deposit continue to exhibit favorable growth trends, particularly in Europe. The group also continues to generate favorable operating results in its core operating segments in Canada and Europe with positive net flows in its Canadian wealth management segment and increasing earnings from its reinsurance business. AM Best believes the recent announcement to consolidate under one brand in Canada and amalgamate the core insurance entities will help streamline operations over the long-term after the initial increase in expenses.

While the U.S. business segment continues to generate increased fee income associated with higher assets under management in its group retirement business, operating margins are much lower due to high levels of competition and also due to a lack of scale within its asset management segment. AM Best also notes that several one-time items have impacted earnings negatively in recent periods including U.S. tax reform and losses from its property and casualty insurance segment due to an active hurricane season in the Atlantic in 2017, and also due to increased expenses associated with restructuring costs and investments in new technology. AM Best believes that the continued low interest rate environment and the competitive market environment in the United States and Canada will continue to be headwinds for group over the near to medium-term.

The FSR of A+ (Superior) and the Long-Term ICRs of “aa” have been affirmed with a stable outlook for The Great-West Life Assurance Company and its affiliates:

  • The Canada Life Assurance Company
  • Canada Life Re Ireland Designated Activity Company
  • Great-West Life & Annuity Insurance Company of New York

  • Great-West Life & Annuity Insurance Company

  • London Life and Casualty (Barbados) Corporation

  • London Life Insurance Company

  • London Life Reinsurance Company

The following Long-Term IRs have been affirmed with a stable outlook:

Great-West Lifeco, Inc.—

— “a” on CAD 500 million 4.65% senior unsecured debentures, due 2020

— “a” on EUR 500 million 2.50% senior unsecured euro bonds, due 2023

— “a” on EUR 500 million 1.75% senior unsecured euro bonds, due 2026

— “a” on CAD 500 million 3.337% senior unsecured debentures, due 2028

— “a” on CAD 200 million 6.74% senior unsecured debentures, due 2031

— “a” on CAD 400 million 6.67% senior unsecured debentures, due 2033

— “a” on CAD 343.788 million 5.998% senior unsecured debentures, due 2039

— “bbb+” on CAD 200 million 4.80% non-cumulative first preferred shares

— “bbb+” on CAD 200 million 5.15% non-cumulative first preferred shares

— “bbb+” on CAD 200 million 5.15% non-cumulative first preferred shares

— “bbb+” on CAD 250 million 5.40% non-cumulative first preferred shares

— “bbb+” on CAD 170 million 5.65% non-cumulative first preferred shares

— “bbb+” on CAD 150 million 5.80% non-cumulative first preferred shares

— “bbb+” on CAD 200 million 5.90% non-cumulative preferred shares (of which $194 million remains outstanding)

— “bbb+” on CAD 213 million 2.18% non-cumulative rate reset preferred shares

— “bbb+” on CAD 37 million floating rate non-cumulative preferred shares

— “bbb+” on CAD 300 million 5.20% non-cumulative preferred shares

— “bbb+” on CAD 300 million 4.50% non-cumulative preferred shares

— “bbb+” on CAD 300 million 4.85% non-cumulative preferred shares

— “bbb+” on CAD 200 million 5.25% non-cumulative preferred shares

Great-West Lifeco Finance (Delaware) LP—

— “a” on USD 700 million 4.15% senior unsecured debentures, due 2047

Great-West Lifeco Finance 2018, L.P.—

— “a” on USD 300 million 4.047% senior unsecured notes, due 2028

— “a” on USD 500 million 4.581% senior unsecured notes, due 2048

Great-West Life & Annuity Insurance Capital, LP—

— “bbb+” on USD 175 million 6.625% junior subordinated deferrable debentures, due 2034

The Canada Life Assurance Company—

— “a+” on CAD 100 million 6.40% subordinated debentures, due 2028

Canada Life Capital Trust—

— “a” on CAD 150 million 7.529% non-cumulative Canada Life Capital Securities (CLiCS), due 2052

The following indicative Long-Term IRs on securities available under shelf registration have been affirmed with a stable outlook:

Great-West Lifeco, Inc.—

— “a” on senior unsecured debt

— “a-” on subordinated debt

— “bbb+” on junior subordinated debt

— “bbb+” on preferred shares

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media – Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global rating agency and information provider with a unique focus on the insurance industry. Visit www.ambest.com for more information.

Copyright © 2019 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

Contacts

Michael Adams

Senior Financial Analyst

+1 908 439 2200, ext. 5133

michael.adams@ambest.com

Christopher Sharkey

Manager, Public Relations

+1 908 439 2200, ext. 5159

christopher.sharkey@ambest.com

Anthony McSwieney

Senior Financial Analyst

+1 908 439 2200, ext. 5715

anthony.mcswieney@ambest.com

Jim Peavy

Director, Public Relations

+1 908 439 2200, ext. 5644

james.peavy@ambest.com

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