Canadian Life Insurers Finish 2022 in Good Shape as the Insurance Business Benefits from Higher Interest Rates
DBRS Morningstar released a commentary titled “Canadian Life Insurers Finish 2022 in Good Shape as the Insurance Business Benefits from Higher Interest Rates,” which discusses Q4 2022 results for the Canadian publicly traded life insurance companies (lifecos) rated by DBRS Morningstar.Key highlights include the following:
-- Top Canadian lifecos had a strong Q4 2022 and continue to generate near-record profitability.
-- The big four lifecos benefit from higher interest rates despite the negative impact on their wealth and asset management operations.
-- Year-over-year growth among the big four lifecos mostly came from mergers and acquisitions activity in the U.S.
-- Higher interest rates are also negative for capital ratios, but we expect this to reverse over time as higher investment income and the transition to IFRS 17 reporting work in the opposite direction.
“After a record performance in 2021 amid favourable market and economic conditions, the big four Canadian lifecos continued to deliver strong earnings in 2022 with total net income of $14.1 billion, only 4% below the $14.8 billion earned in 2021,” said Patrick Douville, Vice President, Insurance. “The trends on all big four lifecos are currently Stable, reflecting their strong financial positions and the supportive interest rate environment for the profitability of their insurance businesses. The transition to IFRS 17 reporting will be a big theme for the industry in 2023 as investors and other market participants familiarize themselves with the new reporting environment. We expect lifecos themselves to take some time to get comfortable with their post-transition capital buffers and sensitivities, after which they may be more confident in making large strategic capital allocation decisions.”
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.
Sun Life Financial is a holding company. Through its subsidiaries, Co. is an international financial services organization providing a range of protection and wealth accumulation products and services to individuals and corporate customers in Canada, the U.S., the U.K., Ireland, Hong Kong, the Philippines, Japan, Indonesia, India, China, Australia, Singapore, Vietnam and Bermuda. Co. manages its operations in four business segments: Sun Life Financial Canada, Sun Life Financial United States, MFS Investment Management and Sun Life Financial Asia.
DBRS Morningstar is a global credit ratings business with 700 employees in eight offices globally. DBRS and Morningstar Credit Ratings are committed to empowering investor success, serving the market through leading-edge technology and raising the bar for the industry.
Together, we are the world’s fourth largest credit ratings agency and a market leader in Canada, the U.S. and Europe in multiple asset classes. We rate more than 2,600 issuers and 54,000 securities worldwide and are driven to bring more clarity, diversity and responsiveness to the ratings process. Our approach and size provide the agility to respond to customers’ needs, while being large enough to provide the necessary expertise and resources. For more details visit us at dbrs.com.
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