IAF Upgraded One Notch (Global Scale) by S&P; Canadian Scale Unaffected

Standard & Poor’s has announced:

  • iA Financial Group (iA) has a meaningful presence in Canada and an increasingly diverse earnings profile supported by strong risk-adjusted returns versus its internal targets and peers’ performance.
  • It also has excellent capital adequacy per our risk-based model.
  • We are raising our ratings on iA’s nonoperating holding company, iA Financial Corp. Inc., to ‘A’ from ‘A-‘ and its operating subsidiary, Industrial Alliance Insurance and Financial Services to ‘AA-‘ from ‘A+’.
  • The outlook is stable reflecting our expectation that iA can maintain current levels of capital while further diversifying its earnings profile and returns.

NEW YORK (S&P Global Ratings) July 22, 2019– S&P Global Ratings said today it raised its financial strength rating (FSR) on Industrial Alliance Insurance and Financial Services Inc. (iA Insurance) to ‘AA-‘ from ‘A+’. At the same time, we raised our long-term issuer credit rating on iA Financial Group’s (iA) nonoperating holding company (NOHC) iA Financial Corp. Inc. to ‘A’ from ‘A-‘. The outlook is stable.

This rating action follows our review of iA under our revised criteria.

The stable outlook reflects the group’s maintenance of a comfortable capital redundancy at the ‘AAA’ level per our model, leading to top-quartile results vis-à-vis peers offering similar products. We do not expect to revise the ratings in the next two years.

While unlikely in the next two years, we could lower our ratings on iA if its:

  • Competitive position deteriorates, perhaps due to an unexpected weakening of its brand or a significant decline in sales; or
  • Capital adequacy weakens to below our ‘AA’ confidence level along with a substantial increase in unhedged exposure to market or interest rate risk.

We believe a further upgrade is unlikely in the next two years.

iA Insurance earns strong returns compared with many U.S. life insurers and Canadian peers that compete globally. Its asset management operations have grown and contribute meaningfully to earnings. Although its investment portfolio is somewhat concentrated in highly rated Canadian provincial bonds and nearly all of its business is conducted in Canada, we view iA’s insurance industry and country risk assessment (IICRA) as lower risk than its globally diversified Canadian peers and U.S. life insurers offering similar products. Its operating performance has been in the top quartile versus peers’ in the past few years and appears to be sustainable. Therefore, we view iA Insurance’s business risk profile as strong and improving.

The preferreds are now rated A (Global Scale), up from A-, and P-1(low) (Canadian Scale) (Unchanged).

Affected issues are: IAF.PR.B, IAF.PR.G and IAF.PR.I

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