(March 5 – 13:45 ET) – Standard & Poor’s has harmonized long-term counterparty credit and financial strength ratings on several Canadian life and health insurers.

On Oct. 31, 2000, Standard & Poor’s combined its Canadian operations with and those of Canadian Bond Rating Service on Oct. 31, 2000.

Since then, a process has been underway to harmonize all ratings assigned by CBRS with the Standard & Poor’s framework, which includes the translation of all ratings onto the Standard & Poor’s ratings scale. The ratings announced today are expressed on Standard & Poor’s global ratings scale.

Going forward, all new debt issue ratings on rated Canadian life and health insurers and their related holding companies will be based on the harmonized issuer credit ratings.

Standard and Poor’s advises that ratings harmonization announcements do not constitute upgrades or downgrades of ratings assigned by CBRS, nor do they signify any changes in an issuer’s underlying credit quality, unless explicitly indicated.

Ratings on specific debt issues previously assigned by CBRS to the companies listed above will remain in effect until May 1, when they will be formally withdrawn (unless superseded in light of credit-related rating actions in the interim).

The CBRS ratings on Crown Life Insurance Co., which was not formerly rated by Standard & Poor’s, have not been harmonized and remain unchanged. These ratings will be addressed prior to May 1.

Standard & Poor’s has harmonized the ratings on the following insurance companies:

  • Canada Life Assurance Co.: double-‘A’, stable outlook;
  • Clarica Life Insurance Co.: double-‘A’, stable outlook;
  • Great-West Life Assurance Co.: double-‘A’-plus, stable outlook;
  • Industrial Alliance Life Insurance Co.: single-‘A’-plus, stable outlook;
  • London Life Insurance Co.: double-‘A’-plus, stable outlook;
  • Manufacturers Life Insurance Co.: double-‘A’-plus, stable outlook
  • Maritime Life Assurance Co.: double-‘A’, negative outlook; and
  • Sun Life Assurance Co. of Canada: double-‘A’-plus, stable outlook.

Standard & Poor’s also announced its harmonized long-term corporate credit ratings on the following Canadian life insurance holding companies:

  • Great-West Lifeco Inc.: double-‘A’-minus, stable outlook;
  • London Insurance Group Inc.: double-‘A’-minus; stable outlook;
  • Manulife Financial Corp.: single-‘A’-plus, stable outlook;
  • Power Corp. of Canada: single-‘A’-plus, stable outlook; and
  • Power Financial Corp.: double-‘A’-minus, stable outlook.

Standard & Poor’s says it views the Canadian life and health insurance sector to be among the most financially strong in the world. Nevertheless, it maintains a negative outlook on the sector due to some significant challenges faced by the industry.

According to ratings agency, the primary challenge facing insurers is rising capital market pressure to increase ROEs. With insurers increasingly competing against non-insurers and with the leading Canadian insurers now public companies, Standard & Poor’s believes that many insurers will choose to utilize excess capital, which has historically supported high ratings. Moreover, Standard & Poor’s believes insurers will be tempted to accept increased incremental risk-taking, whether it be increased asset risk or increased financial leverage
-IE Staff