A.M. Best Places Ratings of Great-West Life Under Review.

Business Editors

OLDWICK, N.J.--(BUSINESS WIRE)--Feb. 19, 2003

A.M. Best Co. has placed the financial strength ratings of A++ (Superior) of Great-West Life Assurance Company (GWL) (Winnipeg, Manitoba), its wholly owned core subsidiary, London Life Insurance Company (London, Ontario) and Great-West Life & Annuity Insurance Co. (GWL&A) (Greenwood Village, CO) under review with negative implications.

In addition, A.M. Best has placed the debt ratings of Great-West Lifeco Inc. (Lifeco) and it subsidiaries under review with negative implications. The financial strength ratings of Canada Life Assurance Company (Toronto) and its subsidiaries are unaffected by these rating actions.

These rating actions follow Lifeco's announced intent to acquire all outstanding common shares of Canada Life Financial Corp. (Canada Life) for C$44.50 using a combination of cash, common shares and preferred shares. The negative implications reflect the heightened leverage and significant goodwill associated with the transaction.

Although GWL has a strong management discipline and a favorable track record for successful integrations, given the size of this acquisition, A.M. Best believes GWL will face significant integration challenges and there is no certainty that planned cost savings will be fully realized. Moreover, Canada Life has a presence in a number of markets outside of North America, where synergies are either minimal or non-existent.

Although these markets offer GWL greater geographic diversification, they also present formidable challenges to profitable growth in areas where GWL has minimal experience. Furthermore, Canada Life recently acquired in Europe the U.K. group protection business from Royal and Sun Alliance and Prudential plc's German operations, thus adding more complexity to integration activities.

Although the deal valued at C$7.3 billion is being financed principally through issuance of common stock and cash, the issuance of additional preferred shares and debentures will increase leverage ratios beyond what A.M. Best considers appropriate for the current ratings. Over recent years, GWL has accessed capital markets to finance its acquisitions and support the growth of its core businesses.

With current total borrowings consisting of debt and preferred shares at about one-third of consolidated capital, GWL's overall financial flexibility is already somewhat constrained for its current ratings.

The purchase of Canada Life will make GWL the largest player in the Canadian market with dominate business positions in all major lines. The combined distribution system along with a multi-brand platform, should serve as a major strength and competitive advantage for GWL.

GWL's financial performance has been consistently strong reflecting its low cost structure, significant scale advantages in its core business lines and solid investment management capabilities. A.M. Best expects the acquisition to be accretive to earnings and to provide very adequate coverage to service existing and proposed debt and preferred share offerings.

In the United States, GWL&A is a significant player in the small- to medium-sized employee benefits market with considerable strength in the public and non-profit financial services sector. Providing a stable source of earnings for Lifeco, its low-cost administrative services platform and service capabilities enable expansion in its client base of self-funded plans.

The financial strength ratings A (Superior) of London Life Reinsurance Company (Blue Bell, Pa.), London Life & Casualty Reinsurance Corp. (Barbados) and London Life and General Reinsurance Company Ltd (Dublin) are unaffected by this rating action.

As of Dec. 31, 2002, Great-West Lifeco Inc. reported consolidated assets (including segregated funds) of C$96.1 billion and capital stock and surplus of C$4.7 billion.

For a comprehensive list of the GWL's financial strength, debt and HMO ratings, visit http://www.ambest.com/press/greatwest5021903.pdf.

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com.