Resilient Results for Canadian Life Insurers After Adoption of IFRS 17
Insurance OrganizationsSummary
DBRS Morningstar released a commentary titled “Resilient Results for Canadian Life Insurers After Adoption of IFRS 17” which discusses 2023 year-to-date results of the Canadian publicly traded life insurance companies (lifecos) rated by DBRS Morningstar.
Key highlights include the following:
-- Although the adoption of IFRS 17 had a significant impact on the financial results reported by Canadian lifecos, it did not result in ratings actions, in line with DBRS Morningstar’s expectations.
-- Despite good growth momentum, earnings for the first two quarters of 2023 declined mainly because of the accounting change and market volatility.
-- With substantial excess capital, the Big Four lifecos will have to find new avenues to deploy capital and grow earnings while carefully monitoring leverage and debt serviceability.
“As per our expectations, the transition to IFRS 17 did not materially affect the financial strength of Canadian lifecos, with the fundamental economics of their business largely unchanged despite the substantial changes to financial reporting,” said Patrick Douville, Vice President, Insurance. “Despite positive growth momentum, earnings in the industry were lower for the first two quarters of 2023 when compared with the 2022 values reported under IFRS 4, mainly because of additional reserve requirements under the new accounting regime and less favorable market impacts. Deployment of surplus capital, earnings growth, and financial leverage will remain key themes for the ratings of the Big Four lifecos as the industry gets more comfortable with IFRS 17 results over time.”