DBRS Downgrades Power Corporation of Canada’s Senior Debt to “A” from A (high): Confirms Great West Life Assurance Co at AA

DBRS Limited (DBRS) has today downgraded Power Corporation of Canada’s (POW or the Company) Senior Debt rating to “A” from A (high) and its Preferred Shares ratings to Pfd-2 from Pfd-2 (high) due to the application of the new insurance methodology. All trends are Stable. All the rating actions are detailed in the table below. The rating actions taken today follow the publication of DBRS’s new methodology, “Global Methodology for Rating Life and P&C Insurance Companies and Insurance Organizations” (December 2015) (Global Insurance Methodology).

The downgrade of POW’s ratings results from the application of the Global Insurance Methodology. POW’s main subsidiary is Power Financial Corporation (PWF), which in turn owns Great-West Lifeco Inc. (GWO), the greatest contributor to earnings and overall strength of PWF. Hence, the Global Insurance Methodology used to rate GWO is by extension the primary methodology for rating POW.

The ratings for POW are one notch below PWF’s ratings under the holding company criteria due to structural subordination. Additionally, PWF’s rating has been set at the same level as GWO’s Issuer Rating. See the press releases for Power Financial Corporation, “DBRS Downgrades Power Financial Corporation’s Issuer Rating to A (high) from AA (low); Confirms Great West Life Assurance Co at AA”, “DBRS Confirms The Great West Life Assurance Company Ratings at AA; Downgrades Great-West Lifeco’s Debentures to A (high) from AA (low)”, for more information.

POW is an investment holding company controlled by the Desmarais family with PWF as its major holding. Other interests include Square Victoria Communications Group, Power Energy, the Sagard investment funds and other investments. POW benefits from a strong capital position, high liquidity and prudent decision-making with an emphasis on conservativeness and integrated risk management. Negative ratings pressure may arise if the subsidiaries suffer extended declines in profitability or more unlikely, if the Company deviates significantly from its value-based approach to leadership and away from its successful operational track record. POW’s ratings could also be negatively impacted by evidence of governance issues. Conversely, an upgrade of PWF could potentially benefit POW’s rating.

Notes:
The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

The applicable methodologies are Rating Holding Companies and Their Subsidiaries (January 2015), Global Methodology for Rating Life and P&C Insurance Companies and Insurance Organizations (December 2015) and Rating Companies in the Asset Management Industry (January 2015), which can be found on our website under Methodologies. In addition, the DBRS Criteria: Preferred Share and Hybrid Criteria for Corporate Issuers (January 2015) is utilized to assess the preferred shares.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

DBRS will publish a report shortly that will provide additional analytical detail on this rating action. If you are interested in receiving this report or for more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.