Fitch Ratings has affirmed the ratings for Great-West Lifeco Inc. and its various operating subsidiaries.

Great-West Lifeco’s ratings strengths include significant business diversification, with a focus on lower risk product design, and consistently robust earnings performance, which is the result of effective management of key drivers, including persistency, expenses and discipline in pricing, Fitch says.

“Balance sheet strengths include very solid consolidated risk-based capitalization, superior investment quality and above-average liquidity. Conservative actuarial reserving practices contribute to continued earnings quality and stability,” it says.

Rating concerns include increased use of financial leverage for acquisition funding, relatively mature Canadian markets and the need to expand the U.S. strategic position, it adds. “Since opportunities for growth within the Canadian insurance market are limited, Great-West Lifeco looks to the United States and Europe for acquisitions and partnerships. To this end, in recent months the company has announced or completed two payout annuity transactions in the U.K. and two 401(k) acquisitions and the purchase of a hospital and physician network in the United States,” it notes.

The rating agency says that Great-West Lifeco’s Canadian, U.S. and European operations contribute to and benefit from the financial strength and diversity of the whole. “Strengths specific to Canadian operations include considerable and sustainable distribution capabilities and leading market positions across all major product and client segments. Strengths specific to U.S. operations include excellent risk-based capitalization, solid market niches and strong administrative capabilities supporting predominately fee-based businesses,” it explains. “Reinsurance operations offer diversification through a complimentary management skill set and European operations provide a solid business platform in faster growing product niches.”

Fitch expects Great-West Lifeco’s disciplined approach to its markets, and sound management of key earnings drivers to continue to produce strong product margins and earnings performance. It expects Great-West Lifeco to maintain very solid consolidated risk-based capitalization.