A.M. Best Company's

Insurance Market BriefingCanada

Stephen Irwin, Vice PresidentRichard McMillan, Managing Senior Financial AnalystSeptember 8, 2010

Company Name AMB # FSR Rating ICR Rating

       

Assumption Mutual Life Insurance Company 8074 A- a-

Assurant Life of Canada 66882 A- a-

Aurigen Reinsurance Company 66889 A- g a-

Blue Cross Life Insurance Company of Canada 68557 A- a-

BMO Life Assurance Company 66835 A a

Canada Life Assurance Company 6183 A+ g aa

Canadian Premier Life Insurance Company 66801 A- a

Canassurance Hospital Service Association 66881 A- g a

Canassurance Insurance Company 66878 A- g a

Co-operators Life Insurance Company 6290 A a

Empire Life Insurance Company 6329 A a

First Canadian Insurance Corporation 66893 A- a-

Great-West Life Assurance Company 6493 A+ g aa

Independent Order of Foresters 60132 A a+

Industrial Alliance Insurance and Financial Services Inc. 6554 A g a+

Industrial Alliance Pacific Insurance and Financial Services Inc. 6838 A g a+

London Life Insurance Company 6667 A+ g aa

Manufacturers Life Insurance Company 6688 A+ g* aa*

Optimum Reassurance Inc. 66827 A- a-

Primerica Life Insurance Company of Canada 60156 A+ g aa-

RBC Life Insurance Company 66806 A a

RGA Life Reinsurance Company of Canada 66817 A+ g aa-

Sun Life Assurance Company of Canada 7101 A+ g Aa

Transamerica Life Canada 66805 B++ bbb+

Unity Life of Canada 66847 A- a-

Wawanesa Life Insurance Company 60079 A a

Western Life Assurance Company 66802 B++ bbb+

Current Ratings

* Rating under review

Look Back-Review

What we said last year: Low interest rates Stock market volatility Global recovery in question-

unemployment still high Canadian currency improving,

depending on the day

Source: Trading Economics

Stock Market Volatility

TSX Composite

6000

8000

10000

12000

14000

16000

Jan-

08

Mar

-08

May

-08

Jul-0

8

Sep-

08

Nov-0

8

Jan-

09

Mar

-09

May

-09

Jul-0

9

Sep-

09

Nov-0

9

Jan-

10

Mar

-10

May

-10

Jul-1

0

Source: Yahoo Finance/ GSPTSE

Source: Trading Economics

Currency Risk

U.S. vs. Canadian

0.9

0.95

1

1.05

1.1

1.15

1.2

1.25

1.3

1.35

1.4

Breaks in chart represent Bank Holidays

Comparison is 1 U.S. dollar to the Canadian dollar

What has transpired?

Capital has rebounded Capital markets receptive Debt & other capital raising Lower investment losses

Net income-better in 2009 Focus on expense control continues Deployment of liquidity yields better returns Surrender activity still within assumptions Product de-risking

Outlook Revised to Stable

Outlook is stable, but remains cautious

Rating outlook reflects likelihood of negative rating actions easing

Does not preclude negative rating actions

Areas of Concern

Economic weakness returns/Global recovery

Interest rate/equity markets Product risk Regulatory/accounting risk International operations

Market Perspective

Still the Big Three 2010 sales up for the most part Expect capital targets to be higher

IFRS

It’s almost here! January 1, 2011opening balance sheet

Phase I-more limited impact Phase II-more to come

New valuation methodology Reaction and options

Regulatory Capital

OSFI continue to refine capital model Living benefit guarantees Guideline A-4

Product Viewpoint Individual products

Capital requirements Group products

Competition remains aggressive Wealth Management and Retirement

products De-risking

Life Reinsurance

Three major players But, looking for counterparty

diversification Individual life re demand robust