SPECIAL REPORT
Special Report: Canadian Life Insurance Industry Year-End 2015 Earnings and Regulatory Update

A.M. Best reviewed the year-end 2015 reported results for the four large publicly traded Canadian life insurance companies: Manulife Financial Corporation (Manulife); Sun Life Financial Inc. (Sun Life); Great-West Lifeco Inc. (Great-West); and Industrial Alliance Insurance and Financial Services, Inc. (Industrial Alliance). International Financial Reporting Standards (IFRS) net income for these Canadian Life Insurance companies has remained favorable despite a slight decrease in total earnings from 2014 to 2015, due primarily to the mark to market impact of securities with exposure to the energy sector. The companies with large investment exposures to the oil and energy sector were negatively impacted in 2015 by impairments due to the volatility in oil prices during the period. Additional downgrades for the sector arose in the first quarter of 2016 as well. Overall operating earnings for the industry remain strong as underwriting performance has been generally favorable, despite some pockets of poor performance for certain blocks such as disability income. Net income also benefitted from favorable international foreign currency translation, as there is a translation benefit from the weakening of the Canadian dollar when accounting for international business with foreign currency compared to the prior period exchange rates. The industry also benefits from growth in asset management business and international expansion.