The Canadian life insurance industry received a stable rating outlook from Moody’s Investors Service in its annual report on the industry, released today. The rating reflects the tightened competitive grip of Canada’s top life insurers on the domestic market, as well as their strong revenue and earnings from their Canadian operations and their significant and growing operations in the U.S. and abroad, says the report.

While Canadian life insurers’ ratings compare favorably with other rated financial institutions in Canada and worldwide, Moody’s expects this relative advantage to shrink slowly over time. This decline will be prompted by a number of factors including a shift toward lower-margin asset accumulation products, intense competition from other financial services providers, and increasing consumer sophistication and awareness.

For the meantime, the recent consolidation trend has created a top tier of very strong players who have the ability to use their considerable scale advantage to out-price, out-service, and out-earn their smaller competitors.

“As a result, smaller Canadian insurers may have to choose between specializing in niche markets where they have competitive advantages or risk being marginalized by competing directly with the top-tier players,” says Ann Perry, vice president and senior credit officer with Moody’s and co-author of the report.

Laura Bazer, vice president and senior credit officer and the report’s other author, views the Canadian life insurance market as essentially mature, meaning that a company’s growth will largely come at the expense of a competitor. Since most of the large Canadian companies are global players, Bazer expects to see an increase in the proportion of their total earnings coming from their foreign operations in the future.

As competition intensifies in the domestic market, Moody’s expects that scale, expense control, access to distribution networks, and technology will be the principal drivers of domestic earnings improvement. The fact that more of Canadian life insurers’ business is moving toward lower-margin asset accumulation type products tends to support the growing importance of these factors.


The Canadian life insurance companies in Moody’s universe, comprise the six largest groups and have ratings between Aa3 and A1 (high to mid-investment-grade), with a positive rating outlook for two of the six companies. They include Great-West/London Life (Aa2), Manulife (Aa2), Sun Life (Aa2), Canada Life (Aa3), Clarica Life (Aa3) and Maritime (A1). Moody’s expects that these groups will continue to dominate the Canadian market for some time to come and that the presence of foreign life insurers in the Canadian market will continue to diminish.

Together these groups represent close to 90% of the Canadian life insurance industry, whether measured by premiums, assets, or net income. Canadian life insurers also have a strong U.S. presence, and over 40% of the major Canadian life insurers’ net income is generated in the States.