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Canada Life Assurance Company (The) -- Moody's affirms The Canada Life Assurance (Aa3 insurance financial strength) and affiliates with a stable outlook

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Rating Action:

Moody's affirms The Canada Life Assurance (Aa3

insurance financial strength) and affiliates with a stable outlook

1 April 2021

Toronto, April 1, 2021 – Moody's Investors Service has affirmed the credit ratings of The Canada

Life Assurance Company (CLA, Aa3 for insurance financial strength (IFS)) and Great-West Life &

Annuity Insurance Company (GWLA, Aa3 for insurance financial strength), the primary operating

companies of Great-West Lifeco (Great-West, not rated; TSE: GWO). The rating outlook for the

companies remains stable.
A full list of affected ratings can be found at the end of this Press Release.
RATINGS RATIONALE
RATINGS RATIONALE – CLA
The affirmation of GWL's strong credit rating reflects the recurring earnings power of its Canadian

franchise. CLA's peer leading earnings stability and return on capital metrics reflect the favorable

competitive structure of the Canadian industry and the strength of its risk management culture. In its

home market, CLA is one of three dominant players in a protected oligopoly, which benefits from a

prudent regulatory regime. CLA's pricing power and market presence drive strong profitability, good

financial flexibility and solid capitalization. CLA also has strong multichannel distribution capabilities.
Partially offsetting these strengths is a sizable exposure to financial institutions, potential earnings

volatility from its reinsurance business and weaker credit profile and market position in the European

business which is currently a key driver of growth.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS – CLA
CLA’s ratings could move upward if GWO continues to improve its financial flexibility with sustained

financial leverage in the low 20% range and earnings coverage consistently above 10x; goodwill &

intangibles-to-equity at GWO dropped below 30%; CLA continues to deliver steady earnings growth

and avoid volatility in its European and reinsurance operations; or CLA consistently maintains capital

adequacy above 145% total LICAT ratio.
The following could lead to a decline in CLA’s ratings: Weakened financial flexibility at GWO,

with financial leverage above 30%, total leverage above 40%, and earnings coverage materially

below 8x; profitability of CLA under pressure with return on capital consistently below 8% with

greater earnings volatility; CLA's total LICAT ratio below 115% for a sustained period; or aggressive

expansion by GWO in a market in regions with weaker sovereign credit profiles or where its current

position is weak or non-existent, diluting the benefit of its strong market positions in Canada.
RATING RATIONALE – GWLA
According to Moody's, the affirmation of GWLA's rating is based on the expected capital support

from CLA and Lifeco, if need be, as well as on its own leading position in the market for defined

contribution pension recordkeeping and administration services under the Empower brand name.

The company’s capitalization is strong, with an NAIC Risk Based Capital ratio (company action level)

at 484% at year-end 2020. A predominantly fee-based, asset-driven business model positions the

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company well for a continuing low interest rate environment, although competition for assets under

management/administration (AUM/AUA) in GWLA’s core markets remains intense.
Offsetting these strengths are the company’s limited business diversification and the vulnerability

of its earnings and AUM/AUA to equity market swings and a recovering economy. The company’s

2020 acquisitions of MassMutual’s retirement business and the Personal Capital hybrid advisor,

totaling approximately USD 3.2 billion, should provide incremental earnings and growth over time,

although consolidated goodwill and intangibles at the consolidated parent company level are high,

with incremental leverage and debt service coverage that will limit the group, and GWLA’s financial

flexibility until debt is reduced.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS – GWLA
The following factors could result in the improvement of GWLA's stand-alone credit profile, or an

upgrade: materially greater business and insurance product diversity that produces sustainable

growth in profitability and capital generation; or the reduction in inter-company reinsurance and

captive activities.
Moody's said the following factors could result in a downgrade of GWLA's ratings: reduction in

perceived support and/or downgrade of Great-West Life, or Great-West Life Assurance and its

affiliates; worsening profitability post transaction (ROC < 4%) increased earnings volatility; or NAIC

RBC ratio below 350% (company action level).
LIST OF AFFECTED RATINGS
..Issuer: The Canada Life Assurance Company
…Affirmation:
….Insurance Financial Strength Rating, affirmed Aa3
….Subordinate (Domestic), affirmed A2
..Outlook Action:
….Outlook remains Stable
..Issuer: GWL&A Financial, Inc.
…Affirmation:
….Issuer rating, affirmed A3
..Outlook Action:
….Outlook remains Stable
..Issuer: Great-West Life & Annuity Insurance Company
…Affirmation:
….Insurance Financial Strength Rating, affirmed Aa3
….Commercial Paper, affirmed P-1
..Outlook Action:
….Outlook remains Stable

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..Issuer: Great-West Life & Annuity Ins. Co. of New York
…Affirmation:
….Insurance Financial Strength Rating, affirmed Aa3
..Outlook Action:
….Outlook remains Stable
CLA is a lead operating entity of GWO, a Canadian financial services holding company which has

interests in life insurance, health insurance, investment and retirement savings, asset management,

and reinsurance businesses, primarily in Canada, the US and Europe. GWO is majority-owned by

Power Corporation (unrated), a diversified international management and holding company that

owns interests, directly or indirectly, in companies that are active in the financial services industry in

Canada, the US and Europe.
The principal methodology used in these ratings was Life Insurers Methodology published in

November 2019 and available at

https://www.moodys.com/researchdocumentcontentpage.aspx?

docid=PBC_1187348

. Alternatively, please see the Rating Methodologies page on www.moodys.com

for a copy of this methodology.
REGULATORY DISCLOSURES
For further specification of Moody’s key rating assumptions and sensitivity analysis, see

the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure

form. Moody’s Rating Symbols and Definitions can be found at:

https://www.moodys.com/

researchdocumentcontentpage.aspx?docid=PBC_79004

.

For ratings issued on a program, series, category/class of debt or security this announcement

provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or

note of the same series, category/class of debt, security or pursuant to a program for which the

ratings are derived exclusively from existing ratings in accordance with Moody's rating practices.

For ratings issued on a support provider, this announcement provides certain regulatory disclosures

in relation to the credit rating action on the support provider and in relation to each particular credit

rating action for securities that derive their credit ratings from the support provider's credit rating.

For provisional ratings, this announcement provides certain regulatory disclosures in relation to the

provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent

to the final issuance of the debt, in each case where the transaction structure and terms have not

changed prior to the assignment of the definitive rating in a manner that would have affected the

rating. For further information please see the ratings tab on the issuer/entity page for the respective

issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit support from the primary entity(ies)

of this credit rating action, and whose ratings may change as a result of this credit rating action, the

associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach

exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated

entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entities or their designated agent(s) and issued with no

amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody’s Policy for Designating and Assigning Unsolicited

Credit Ratings available on its website www.moodys.com.

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Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the

related rating outlook or rating review.
Moody’s general principles for assessing environmental, social and governance (ESG) risks in our

credit analysis can be found at

https://www.moodys.com/researchdocumentcontentpage.aspx?

docid=PBC_1243406

.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s

affiliates outside the EU and is endorsed by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt

am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No

1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the

Moody’s office that issued the credit rating is available on www.moodys.com.
The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s

affiliates outside the UK and is endorsed by Moody’s Investors Service Limited, One Canada

Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK.

Further information on the UK endorsement status and on the Moody’s office that issued the credit

rating is available on www.moodys.com.
The below contact information is provided for information purposes only. Please see the ratings tab

of the issuer page at www.moodys.com, for each of the ratings covered, Moody’s disclosures on the

lead rating analyst and the Moody’s legal entity that has issued the ratings.
Please see www.moodys.com for any updates on changes to the lead rating analyst and to the

Moody's legal entity that has issued the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory

disclosures for each credit rating.
David Beattie

Senior Vice President

Financial Institutions Group

Moody's Canada Inc.

70 York Street

Suite 1400

Toronto, ON M5J 1S9

Canada

JOURNALISTS: 1 212 553 0376

Client Service: 1 212 553 1653
Scott Robinson, CFA

Associate Managing Director

Financial Institutions Group

JOURNALISTS: 1 212 553 0376

Client Service: 1 212 553 1653
Releasing Office:

Moody's Canada Inc.

70 York Street

Suite 1400

Toronto, ON M5J 1S9

Canada

JOURNALISTS: 1 212 553 0376

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Client Service: 1 212 553 1653

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