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In addition, A.M. Best has assigned a debt rating of "a" to the CAD 500 million fixed/floating rate subordinated debentures due 2068 of Great West Lifeco Finance (Delaware) LPII. The outlook assigned to this rating is stable. These securities will be fully and unconditionally guaranteed on a subordinated basis by Great-West. The net proceeds from this offering will be used by Great-West Lifeco Finance (Delaware) LP II to provide funding to Great-West and its indirect and direct subsidiaries for general corporate purposes in order to carry on business operations including the repayment of all or part of outstanding bank indebtedness.
In addition, A.M. Best has assigned a debt rating of "a-" to the CAD 200 million fixed/floating rate non-cumulative preferred stock of Great-West. The outlook assigned to this rating is stable. The net proceeds of this offering will be used by Great-West for general corporate purposes and to augment the corporation's current liquidity position. (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 core business lines, historically strong operating fundamentals and favorable financial performance. Additionally, through strategic acquisitions, the group has achieved significant and sustainable scale advantages in core business lines in Canada. Furthermore, Great-West's diversified operations and conservative asset portfolio historically has enhanced its ability to weather downturns during hard economic times.
A.M. Best is comfortable that Great-West will continue to manage its leverage position within expectations for the current ratings. 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, stable earnings contribution from its U.S. operations and further opportunities for geographic diversification arising from continued expansion in its international business segments. These factors all contribute to Great-West's favorable ability to service its debt. Moreover, Great-West maintains an excellent liquidity posture supported by high quality investments, stable sources of earnings resulting in solid coverage ratios.
During 2008, the Canadian economy remained relatively unscathed by the U.S. mortgage crisis, which coupled with Great-West's leading market position in Canada, conservative pricing discipline and low expense structure, enabled Great-West to return favorable operating results on a quarterly basis. Moreover, the Canadian distribution systems of Great-West and its operating companies represent Canada's largest and serve as a major strength and competitive advantage.
In the United States, GWL&A is a well established player with considerable strength in the public and non-profit financial services sector and a leading marketer of business-owned life insurance products, providing a stable source of earnings for Great-West.
Offsetting rating factors include Great-West's evolving strategy for the U.S. market. In 2007, the company experienced a significant increase in goodwill resulting from acquisition activity, particularly the Putnam transaction. In 2008, Great-West exited its healthcare franchise using the proceeds to offset the financing associated with the Putnam transaction. While this refinancing did reduce its overall leverage position, the concentration associated with the retirement services sector may dampen earnings growth due to the turbulent economic conditions faced in the U.S. market. Earnings growth for Great West's Canadian operations may be pressured by Canada's highly competitive and saturated marketplace as well as economic pressures associated with the global credit crisis and overall economic slowdown. In addition, Great-West has increased its exposure to longevity risk in Europe through recent acquisitions of large annuity payout blocks in the United Kingdom.
For a complete listing of Great-West Lifeco, Inc.'s FSRs, ICRs and debt ratings, please visit www.ambest.com/press/012203greatwest.pdf.
The principal methodologies used in determining these ratings, including any additional methodologies and factors, which may have been considered, can be found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.
SOURCE: A.M. Best Co.
A.M. Best Co. Analysts: Marc Steinberg, 908-439-2200, ext. 5225 marc.steinberg@ambest.com or William Pargeans, 908-439-2200, ext. 5359 william.pargeans@ambest.com or Public Relations: Jim Peavy, 908-439-2200, ext. 5644 james.peavy@ambest.com or Rachelle Morrow, 908-439-2200, ext. 5378 rachelle.morrow@ambest.com
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