The big three Canadian life insurers — Manulife Financial Corp., Sun Life Financial Inc. and Great-West Lifeco — have each had their credit ratings affirmed by Fitch Ratings.

Fitch affirmed its ratings of the three big life insurers in separate reports today, with stable outlooks. The rating agency says that it views the Canadian life insurance market as inherently less risky than the U.S. life market “due to greater pricing rationality and less aggressive product guarantees.”

The issuer default rating of Great-West Lifeco Inc. (TSX:GWO) was affirmed at ‘A+’, with Fitch noting the company’s “consistently strong and stable core insurance earnings; strong competitive position in the Canadian market; conservative investment profile; and overall actuarial liability profile that is not heavily exposed to the equity markets.”

On the downside, the rating agency points to Great-West’s “relatively high use of financial leverage and the ongoing underperformance of Putnam Investments, which has strained overall earnings levels and has caused fixed-charge coverage to remain at depressed levels for some time.”

The ratings of Sun Life Financial (TSX:SLF) were affirmed at ‘A’, with Fitch citing the firm’s “improved earnings and operating profile, strong capitalization, disciplined investment strategies that have resulted in strong liquidity and solid asset quality, the company’s leading market position in Canada, growth prospects for emerging Asian markets, and relatively stable performance in U.S. mutual funds.”

Fitch notes that Sun Life has taken a number of steps to reduce earnings volatility, but it says that its earnings “remain susceptible to the continued challenge of low interest rates.” It also points to the company’s low fixed-charge coverage and large shareholder dividends as rating negatives.

The rating agency also affirmed its rating on Manulife Financial Corp. (TSX:MFC) at ‘A’, which it says reflects Manulife’s “improved operating earnings, strong capital position, below-average exposure to credit-related risk, good liquidity and strong business profile with significant geographic and product diversity.” Although it notes that the company’s debt service capacity is low for the rating category.

Fitch says that the major challenges that could impact Manulife’s ability to further improve profitability include “sustained low interest rates, equity market volatility, and a faltering of the economic recovery.” It says these factors could constrain the insurer’s earnings growth over the near term, “and in a severe, albeit unexpected, economic scenario, they could significantly affect the company’s earnings and capital.”