Moody’s Investors Service has upgraded its outlook on Great-West Life Assurance Co., and affirmed its Ratings on the company. The outlook is boosted to stable from negative.

Moody’s had downgraded with a negative outlook the ratings of GWL and related companies on July 10, 2003, following the acquisition of Canada Life Financial Corp., citing concerns about a sustained period of elevated financial leverage, reduced earnings coverage ratios, integration risk, and the challenge of managing Canada Life’s subsidiaries in the UK, Ireland, and Germany, where the Great-West companies had little past experience.

The rating agency said that the outlook change to stable reflects its view that GWL has been successful in reducing its consolidated financial leverage while maintaining solid interest coverage ratios since the acquisition of Canada Life. Moody’s also noted that the company has successfully completed the Canada Life acquisition and is obtaining solid earnings growth from its European subsidiaries.

Moody’s added that GWL’s ratings could be upgraded if management continues to make progress in reducing adjusted financial leverage (which includes a 50% haircut for goodwill & intangibles) to below 25%; the company strengthens its MCCSR capital ratio to above 220%; consolidated pre-tax interest coverage consistently exceeds 10x; and, it reduces its exposure to the higher-risk reinsurance business.

The rating agency also said that the ratings could be downgraded if a large, debt-financed acquisition results in a material increase in financial leverage; adjusted financial leverage increases above 30%; consolidated pre-tax interest coverage drops below 8x for a sustained period; the MCCSR capital ratio drops below 200% for a sustained period; and, earnings deteriorate below current solid levels.