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The outlook for the Canadian life insurance sector remains stable in the face of an array of challenges, thanks to the companies’ strong capital positions and diversified business models, says DBRS Inc.

In a new report, the rating agency said that the big lifecos — Manulife Financial Corp., Sun Life Financial Inc. and Great-West Lifeco Inc. — remain in good shape to weather the prevailing low-return environment.

DBRS said the sector will continue to face a variety of challenges over the coming year, including slowing economic growth in Canada and the U.S. and escalating trade tensions, which represent downside risks.

Yet, DBRS believes Canadian lifecos are in relatively good shape to face these forces.

“The sector remains well capitalized with strong operating earnings,” it said, noting that the trio of companies is expected to produce continued revenue growth from their domestic operations, with these results bolstered by their foreign businesses.

“In general, these life insurers have been managing their exposure to interest rate and equity market exposure by pivoting their product portfolio toward less capital-intensive offerings to maintain healthy regulatory capitalization ratios,” the report said.

“In the face of market uncertainties, life insurers will need to remain disciplined in managing the overall risks they are willing to take to grow their businesses and remain profitable,” it added.

Additionally, the rating agency said that a variety of regulatory and accounting changes are under consideration that will affect life insurers, and that technological innovation is expected to impact the industry too.