Fitch Ratings has affirmed the ratings of
The Rating Outlook is Stable.
The ratings rationale is based upon 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. Offsetting these positives are the company's relatively high use of financial leverage and the ongoing underperformance of
Fitch views positively GWO's solid core insurance earnings performance as it drives and supports the company's financial flexibility and consolidated risk-based capital position. Fitch believes this performance is reflective of the company's conservative risk appetite which has resulted in lower-risk product design, pricing discipline, strict asset-liability matching, and management of key earnings drivers such as expenses and persistency. Additionally Fitch 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. Operating earnings in the first nine months of 2012 were
Fitch believes GWO's investment performance is a reflection of its conservative investment policies and underwriting standards as well as its asset/liability, liquidity and investment skills. By policy, the company does not invest in below-investment-grade (BIG) credits, and therefore reported exposure in this category consists of 'fallen angels,' including privately placed issues with strong covenant protection. BIGs totaled
Fitch believes GWO's actuarial liabilities are relatively insensitive to equity markets, due to the avoidance of riskier enhancements to individual segregated funds. The company's primary exposure to equity markets is through Putnam.
Key rating triggers for GWO's ratings that could lead to a downgrade include:
--A sustained drop in the company's risk-adjusted capital position with no plans or ability to rectify. This would include the U.S. risk-based capital ratio falling below 400 percent and MCCSR ratios falling below 200 percent;
--Increase in financial leverage to over 25 percent or an increase in total leverage to over 35 percent;
--Sizable goodwill impairment on Canada Life or
--Acquisitions outside GWO's historical risk preferences or expertise, or any other material changes in risk appetite for the company;
Fitch considers an upgrade of GWO's ratings in the near to intermediate term unlikely.
Fitch has affirmed the following ratings with a Stable Outlook:
--Long-term IDR at 'A+';
--6.14 percent senior debentures due
--4.65 percent senior debentures due
--6.74 percent senior debentures due
--6.67 percent senior debentures due
--5.998 percent senior debentures due
--Series F, 5.9 percent non-cumulative first preferred shares at 'BBB+';