Canadian Insurance Debt Issuances More Than Halved in 2022 but Expected to Regain Traction in 2023
DBRS Morningstar published a commentary discussing the drivers of the significant slowdown in Canadian insurance debt issuances in 2022 following record issuances in 2020 and 2021. The commentary also discusses the prospects for 2023, which we expect to be moderately more active in terms of debt issuances as Canadian insurers re-enter the market to continue with their acquisition plans and refinance maturing instruments.Key highlights include the following:
-- Canadian insurance companies issued $4.7 billion in debentures and preferred shares in 2022, a 60% decline compared with 2021.
-- The weighted-average issuance coupon and maturity was 5.552% and 24 years, respectively.
-- We expect insurance debt issuances levels to moderately increase in 2023 as Canadian insurers adapt to the higher rate environment, continue their acquisition plans, and fund upcoming debt maturities.
“Despite the considerable decrease in insurance debt issuances in 2022, we expect a moderate uptick in issued debt levels during 2023. Our outlook is based on a scenario of either stable interest rates or moderate increases in the Bank of Canada’s overnight rate for the rest of 2023 as inflationary pressures begin to lose steam and the Canadian corporate bonds’ spread remains under 200 basis points in line with the first two months of the year,” said Marcos Alvarez, Global Head of Insurance. “However, we expect insurance debt issuances to remain materially below the levels seen in 2020 and 2021.”
Fairfax Financial Holdings is a financial services holding company. Through its subsidiaries, Co. is engaged in property and casualty insurance and reinsurance and investment management. Co.'s insurance and reinsurance companies operate on a decentralized basis, with autonomous management teams applying a focused underwriting strategy to their markets. Co.'s investments are centrally managed for all the Co.'s group of companies by Hamblin Watsa Investment Counsel Ltd. Co. operates four main operating segments: Insurance, Reinsurance, Reinsurance and Insurance - Other, and Runoff.
Great-West Lifeco is a financial services holding company with interests in the life insurance, health insurance, retirement savings, investment management and reinsurance businesses. Co. has operations in Canada, the United States, Europe and Asia through The Great-West Life Assurance Company, London Life Insurance Company, The Canada Life Assurance Company, Great-West Life & Annuity Insurance Company and Putnam Investments, LLC. Co., through its operating subsidiaries, provides protection and savings products that are distributed through multiple sales channels. Products are marketed under the Great-West Life, London Life and Canada Life brands.
Manulife Financial is a provider of financial protection and wealth management products and services, including individual life insurance, group life and health insurance, long-term care insurance, pension products, annuities and mutual funds to individual and group customers in Asia, Canada and the United States. Co. also provides investment management services with respect to Co.'s general fund assets, segregated fund assets, mutual funds, and to institutional customers. Co. also offers reinsurance services, specializing in property and aviation catastrophe risk reinsurance products.
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