OLDWICK, N.J., June 22 /CNW/ - A.M. Best Co. has affirmed the financial
strength rating (FSR) of A+ (Superior) and issuer credit ratings (ICR) of "aa"
of Great-West Life Assurance Company (GWL) (Winnipeg, Manitoba) and Great-West
Life & Annuity Insurance Company (GWL&A) (Greenwood Village, CO). A.M. Best
has also affirmed the ICR of "a+" of GWL and GWL&A's parent, Great-West
Lifeco, Inc. (Great-West) (Winnipeg, Manitoba) and all debt ratings issued by
Great-West and its subsidiaries. All ratings have been removed from under
review with negative implications and assigned a stable outlook.
In addition, A.M. Best has assigned a debt rating of "a" to Great West
Lifeco Finance (Delaware) LP's CAD 1.0 billion fixed/floating rate
subordinated debentures due 2067. These securities will be fully and
unconditionally guaranteed on a subordinated basis by Great-West. Proceeds
from this offering will be used by Great-West to provide funding to indirect
and direct subsidiaries for general corporate purposes, including to finance
the USD 3.9 billion acquisition of asset manager Putnam Investment Trust
(Putnam) from Marsh & McLennan Cos. (See link below for a detailed listing of
the companies and ratings.)
The rating affirmations are based on Great-West's operating companies'
very strong market positions in their core business lines, superior financial
performance and operating fundamentals, significant and sustainable scale
advantages in core business lines in Canada and strong investment management
capabilities. Following the CAD 1.0 billion debt issuance, A.M. Best is
comfortable that Great-West will be able to manage its leverage position
within expectations for the current ratings. A.M. Best notes that Great-West
has historically elevated its leverage during acquisitions, but its strong
track record of successfully integrating these transactions has allowed it to
reduce leverage in a relatively short period of time.
The ratings also consider Great-West's consolidated position as a market
leader in the Canadian individual and group areas, with superior market
positions in both the protection and wealth accumulation segments, solid
earnings contribution from its U.S. operations and further geographic
diversification arising from continued expansion in its international business
segments in Europe.
Organic growth, along with significant acquisitions in Canada, has led to
strong and sustainable earnings growth. Given Great-West's Canadian market
position, pricing discipline and low expense structure, A.M. Best expects to
see continued earnings growth and superior shareholder returns. Moreover, the
Canadian distribution systems of Great-West and its subsidiaries represent
Canada's largest and serve as a major strength and competitive advantage for
In the United States, GWL&A is a significant player in the small to
medium-sized employee benefits market, with considerable strength in the
public and non-profit financial services sector. Its low cost administrative
services platform and service capabilities enable expansion in its client base
of self-funded plans, providing a stable source of earnings for Great-West. In
addition, its sizable book of closed annuity and individual life insurance
generate a significant proportion of GWL&A's earnings.
A.M. Best believes that Great-West's debt service capabilities will
remain favorable. Great-West maintains an excellent liquidity posture
supported by high quality investments, stable sources of earnings and solid
coverage ratios. In the near term, Great-West's overall financial flexibility
is somewhat reduced by the Putnam acquisition due to increased overall
leverage and lower, but still strong, coverage ratios.
Offsetting rating factors include heightened leverage and significant
goodwill resulting from acquisition activity, which will increase considerably
with the acquisition of Putnam. Great-West also faces challenges associated
with growth in its core U.S. business segment and expansion in Canada's highly
competitive and saturated marketplace. Great-West has also increased its
exposure to longevity risk through recent acquisitions of large annuity payout
blocks in the United Kingdom. Upon the close of the transaction, A.M. Best
will monitor Putnam and evaluate its ability to continue to retain key
management, realize expected margin improvements and improve net flows.
For a complete listing of Great-West Lifeco, Inc.'s FSRs, ICRs and debt
ratings, please visit www.ambest.com/press/062202greatwest.pdf.
Founded in 1899, A.M. Best Company is a full-service credit rating
organization dedicated to serving the financial services industries, including
the banking and insurance sectors. For more information, visit www.ambest.com.
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