DBRS Morningstar, a leading credit rating agency, has recently confirmed the Financial Strength Rating and Issuer Rating of The Equitable Life Insurance Company of Canada (Equitable Life) at A (high), with Stable trends. This affirmation reflects Equitable Life’s established presence in the Canadian life insurance market, offering a range of individual and group products.
Strong Market Position and Profitability
Equitable Life’s ratings are supported by its focus on participating insurance, which allows the transfer of a significant portion of its risk exposures to policyholders. The company has demonstrated consistently strong profitability and capital levels, even during periods of financial market volatility. Furthermore, Equitable Life has successfully positioned itself as the independent alternative of choice for leading distributors owned by other insurers, thanks to its distribution strategy. Equitable Life holds a sufficient amount of cash and a sizable portfolio of highly rated marketable securities, including equity, real estate, private placements, and commercial mortgages.
Future Prospects and Considerations
In terms of credit rating drivers, Equitable Life’s ratings are well placed in the current category. However, the ratings could be upgraded in the longer term if the company significantly strengthens its market position while maintaining strong profitability metrics and appropriate capitalization buffers. Conversely, the ratings could be downgraded if Equitable Life experiences a material deterioration in profitability, capitalization, or the strength of its distribution channels.
Strengths and Growth Potential
Equitable Life operates primarily in the Canadian life insurance middle-market, where it is particularly strong in the participating life insurance line. Despite competing with larger insurers, Equitable Life’s smaller size provides flexibility in adapting to changing market conditions and adjusting its product offerings. The company continues to focus on profitable organic growth while enhancing its product portfolio, competitiveness, and digital capabilities.
The product portfolio of Equitable Life is heavily focused on participating individual life insurance, which allows the company to share some risks with policyholders. Moreover, Equitable Life has consistently achieved premium and deposit growth rates that exceed the industry average, reflecting its commitment to conservative underwriting practices and a track record of consistent profitable growth.
Strong Capitalization and Liquidity
Equitable Life exhibits strong capitalization, reflected by its lack of financial leverage and a robust regulatory solvency ratio of 169% at Q1 2023. The company also maintains a stable claims profile with adequate reinsurance coverage. Equitable Life’s strong liquidity position is supported by its substantial holdings of cash, government bonds, and other marketable securities. The company has expanded its investments in less liquid securities, while maintaining a strong cashable long-term insurance liabilities position.
Environmental, Social, Governance Considerations
DBRS Morningstar’s credit analysis found no significant or relevant environmental, social, or governance factors that impacted Equitable Life’s credit ratings.
FAQs
Q: How is Equitable Life rated by DBRS Morningstar?
A: Equitable Life has been rated A (high), with Stable trends by DBRS Morningstar, reflecting its strong market position, profitability, and capitalization.
Q: What is Equitable Life’s focus in the Canadian life insurance market?
A: Equitable Life specializes in the participating life insurance line in the Canadian middle-market, leveraging its mutual status to compete with larger insurers.
Q: What factors could lead to an upgrade or downgrade in the ratings?
A: The ratings could be upgraded if Equitable Life strengthens its market position, maintains strong profitability, and improves its capitalization buffers. Conversely, the ratings could be downgraded if the company experiences a material deterioration in profitability, capitalization, or the strength of its distribution channels.
Conclusion
DBRS Morningstar’s confirmation of the ratings on The Equitable Life Insurance Company of Canada reflects the company’s strong market position, profitability, and capitalization. Equitable Life’s focus on participating insurance, successful distribution strategy, and robust investment portfolio are key factors contributing to its positive ratings. As Equitable Life continues to grow and enhance its offerings, it remains well-positioned in the Canadian life insurance market.
For more information, please visit DBRS Morningstar’s website.
