Insurance majors increasingly edging into wealth management turf

Insurance majors increasingly edging into wealth management turf

Insurance majors increasingly edging into wealth management turf

Double digit growth for Canadian life insurers' wealth management business in the second quarter helped continue the first quarter's positive trend, Moody's Investors Service said in its latest special comment, indicating that the insurance channel will increasingly expand into the advisory and planning business.

"Wealth management sales saw double digit growth for all three insurers across geographies, in many cases setting new highs for AUM which bodes well for future fee income," said David Beattie, a Moody's Vice President -- Senior Credit Officer, and author of the report. "Renewed customer investment activity and strong investment performance have both contributed to this trend."

Moody's report covers second quarter results for the three Canadian life insurers Sun Life Financial Inc. (SLF), Great-West Life (GWL), and Manulife Financial.

Moody's expects that as the Canadian economy continues to recover consumers will allocate more funds to retirement savings. In addition, higher interest rates and reduced equity market volatility will continue to encourage investment activity and mutual fund assets under management AUM, a stable source of recurring earnings for Canadian life insurers.

Moody's said the second quarter of 2013 also saw significant development activity with SLF's completed sale of its US annuity business and GWL's acquisition of Irish Life. SLF's sale is credit positive for the insurer as it eliminates the group's exposure to the chronically poor earnings of the US subsidiary. The GWO-Irish Life transaction has strategic benefits but Irish Life's relatively weak credit profile will negatively affect GWO's credit profile, given the attendant sovereign and economic risks associated with expanding operations in Ireland, said Moody's.

The quarter was relatively free of significant negative market impacts, the exception being Manulife's $291 million charge arising from the direct impact of equity markets and interest rates and investment-related losses, of which $180 million may reverse in future quarters. Manulife remains the most exposed to earnings volatility arising largely from policyholder friendly guarantee features, says the rating agency.