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LICAT

Capital Adequacy

Brookfield Annuity Company is a Canadian life insurance company regulated by the Office of the Superintendent of Financial Institutions (OSFI), which introduced a regulatory capital framework called the Life Insurance Capital Adequacy Test (LICAT) on January 1, 2018.

See our white paper, LICAT – An Evolution in Risk Assessment and Risk Management, to learn more about the standards Brookfield Annuity has to meet and the steps we take to fulfill our obligations to our clients and annuity members.



LICAT Ratios Public Disclosure Summary

(thousands of dollars, except percentages)

Companies are required, at minimum, to maintain a Core Ratio of 55%1 and a Total Ratio of 90%. OSFI has established supervisory target levels of 70% for Core and 100% for Total Capital.

Brookfield Annuity exceeds all of OSFI’s minimum capital requirements. At December 31, 2021, we had a LICAT total ratio of 147%, as compared to OSFI’s regulatory minimum of 90%.

  31 Dec 2021 30 Sep 2021 % Change
Available Capital (AC1 + B) (AC) 231,375 183,202 +26%
Tier 1 Capital (AC1) 231,375 183,202 +26%
Tier 2 Capital (B)      
Surplus Allowance and Eligible Deposits (SA + ED) 62,737 77,371 -19%
Base Solvency Buffer (BSB) 199,722 165,888 +20%
Total Ratio ([AC + SA + ED]/BSB) x 100 147% 157% -6%
Core Ratio ([AC1 + 70% SA + 70% ED]/BSB) x 100 138% 143% -3%

1) Regulated insurance holding companies and non-operating insurance companies

Explanation of Changes in LICAT Ratio in the Fourth Quarter of 2021:

The Company’s base solvency buffer increased by 20% as a result of new business acquired in the fourth quarter while surplus allowance and eligible deposits decreased by 19% and available capital increased by 26%. Overall, the LICAT Total Ratio decreased by 6% at 31 December 2021.

Brookfield Annuity exceeds all of OSFI’s minimum capital requirements. At September 30, 2021, we had a LICAT total ratio of 157%, as compared to OSFI’s regulatory minimum of 90%.

  30 Sep 2021 30 June 2021 % Change
Available Capital (AC1 + B) (AC) 183,202 114,896 +59%
Tier 1 Capital (AC1) 183,202 114,896  
Tier 2 Capital (B)      
Surplus Allowance and Eligible Deposits (SA + ED) 77,371 57,614 +34%
Base Solvency Buffer (BSB) 165,888 114,862 +44%
Total Ratio ([AC + SA + ED]/BSB) x 100 157% 150% +5%
Core Ratio ([AC1 + 70% SA + 70% ED]/BSB) x 100 143% 135% +6%

1) Regulated insurance holding companies and non-operating insurance companies

Explanation of Changes in LICAT Ratio in the Third Quarter of 2021:

The Company’s base solvency buffer increased by 44% as a result of new business acquired in the third quarter while surplus allowance and eligible deposits increased by 34% and available capital increased by 59%. Overall, the LICAT Total Ratio increased by 5% at 30 September 2021.

Brookfield Annuity exceeds all of OSFI’s minimum capital requirements. At June 30, 2021, we had a LICAT total ratio of 150%, as compared to OSFI’s regulatory minimum of 90%.

  30 June 2021 31 Mar 2021 % Change
Available Capital (AC1 + B) (AC) 114,896 111,746 +3%
Tier 1 Capital (AC1) 114,896 111,746  
Tier 2 Capital (B)      
Surplus Allowance and Eligible Deposits (SA + ED) 57,614 45,329 +27%
Base Solvency Buffer (BSB) 114,862 107,721 +7%
Total Ratio ([AC + SA + ED]/BSB) x 100 150% 146% +3%
Core Ratio ([AC1 + 70% SA + 70% ED]/BSB) x 100 135% 133% +2%

1) Regulated insurance holding companies and non-operating insurance companies

Explanation of Changes in LICAT Ratio in the Second Quarter of 2021:

The Company’s base solvency buffer increased by 7% as a result of new business acquired in the second quarter while surplus allowance and eligible deposits increased by 27% and available capital increased by 3%. Overall, the LICAT Total Ratio increased by 3% at 30 June 2021.

Brookfield Annuity exceeds all of OSFI’s minimum capital requirements. At March 31, 2021, we had a LICAT total ratio of 146%, as compared to OSFI’s regulatory minimum of 90%.

  31 Mar 2021 31 Dec 2020 % Change
Available Capital (AC1 + B) (AC) 111,746 105,519 +6%
Tier 1 Capital (AC1) 111,746 105,519  
Tier 2 Capital B      
Surplus Allowance and Eligible Deposits (SA + ED) 45,329 40,087 +13%
Base Solvency Buffer BSB 107,721 106,394 +1%
Total Ratio ([AC + SA + ED]/BSB) x 100 146% 137% +7%
Core Ratio ([AC1 + 70% SA + 70% ED]/BSB) x 100 133% 126% +6%

1) Regulated insurance holding companies and non-operating insurance companies

Explanation of Changes in LICAT Ratio in the First Quarter of 2021:

The Company’s base solvency buffer increased modestly while surplus allowance and eligible deposits increased by 13% and available capital increased by 6% over the quarter. Overall, the LICAT Total Ratio increased by 7% at 31 March 2021.

Brookfield Annuity exceeds all of OSFI’s minimum capital requirements. At December 31, 2020, we had a LICAT total ratio of 137%, as compared to OSFI’s regulatory minimum of 90%.

  31 Dec 2020 30 Sep 2020 % Change
Available Capital (AC1 + B) (AC) 105,519 86,210 +22%
Tier 1 Capital (AC1) 105,519 86,210  
Tier 2 Capital B      
Surplus Allowance and Eligible Deposits (SA + ED) 40,087 37,303 +7%
Base Solvency Buffer BSB 106,394 90,452 +18%
Total Ratio ([AC + SA + ED]/BSB) x 100 137% 137%
Core Ratio ([AC1 + 70% SA + 70% ED]/BSB) x 100 126% 124% +2%

1) Regulated insurance holding companies and non-operating insurance companies

Explanation of Changes in Solvency Ratio in the Fourth Quarter of 2020:

The Company’s base solvency buffer increased by 18% as a result of new business acquired in the fourth quarter while surplus allowance and eligible deposits increased by 7%; with the drawdown of additional shareholder capital to support the new business, the LICAT Total Ratio remained unchanged at the end of 2020.

Brookfield Annuity exceeds all of OSFI’s minimum capital requirements. At September 30, 2020, we had a LICAT total ratio of 137%, as compared to OSFI’s regulatory minimum of 90%.

  30 Sep 2020 30 Jun 2020 % Change
Available Capital (AC1 + B) (AC) 86,210 83,701 +3%
Tier 1 Capital (AC1) 86,210 83,701  
Tier 2 Capital B      
Surplus Allowance and Eligible Deposits (SA + ED) 37,303 39,844 -6%
Base Solvency Buffer BSB 90,452 73,659 +23%
Total Ratio ([AC + SA + ED]/BSB) x 100 137% 168% -18%
Core Ratio ([AC1 + 70% SA + 70% ED]/BSB) x 100 124% 152% -18%

1) Regulated insurance holding companies and non-operating insurance companies

Explanation of Changes in Solvency Ratio in the Third Quarter of 2020:

The Company’s base solvency buffer increased by 23% as a result of new business acquired in the third quarter while surplus allowance and eligible deposits decreased by 6%, which resulted in the LICAT Total Ratio decreasing by 18% in relative terms over this period.

Brookfield Annuity exceeds all of OSFI’s minimum capital requirements. At June 30, 2020, we had a LICAT total ratio of 168%, as compared to OSFI’s regulatory minimum of 90%.

  30 June 2020 31 Mar 2020 % Change
Available Capital (AC1 + B) (AC) 83,701 83,576 ~0%
Tier 1 Capital (AC1) 83,701 83,576  
Tier 2 Capital B      
Surplus Allowance and Eligible Deposits (SA + ED) 39,844 33,840 +18%
Base Solvency Buffer BSB 73,659 72,427 +2%
Total Ratio ([AC + SA + ED]/BSB) x 100 168% 162% +4%
Core Ratio ([AC1 + 70% SA + 70% ED]/BSB) x 100 152% 148% +3%

1) Regulated insurance holding companies and non-operating insurance companies

Explanation of Changes in Solvency Ratio in the Second Quarter of 2020:

In the second quarter of 2020, the Company’s base solvency buffer increased by 2% while surplus allowance and eligible deposits increased by 18%, which resulted in the LICAT Total Ratio increasing by 4% in relative terms over this period.

Brookfield Annuity exceeds all of OSFI’s minimum capital requirements. At March 31, 2020, we had a LICAT total ratio of 162%, as compared to OSFI’s regulatory minimum of 90%.

  31 Mar 2020 31 Dec 2019 % Change
Available Capital (AC1 + B) (AC) 83,576 84,013 -1%
Tier 1 Capital (AC1) 83,576 84,013  
Tier 2 Capital B      
Surplus Allowance and Eligible Deposits (SA + ED) 33,840 36,781 -8%
Base Solvency Buffer BSB 72,427 73,586 -2%
Total Ratio ([AC + SA + ED]/BSB) x 100 162% 164% -1%
Core Ratio ([AC1 + 70% SA + 70% ED]/BSB) x 100 148% 149% -1%

1) Regulated insurance holding companies and non-operating insurance companies

Explanation of Changes in Solvency Ratio in the First Quarter of 2020:

In the first quarter of 2020, the Company’s base solvency buffer decreased by 2% while surplus allowance and eligible deposits decreased by 8%, which resulted in the LICAT Total Ratio decreasing by 1% in relative terms over this period.

Brookfield Annuity exceeds all of OSFI’s minimum capital requirements. At December 31, 2019, we had a LICAT total ratio of 164%, as compared to OSFI’s regulatory minimum of 90%.

  31 Dec 2019 30 Sep 2019 % Change
Available Capital (AC1 + B) (AC) 84,013 82,168 +2%
Tier 1 Capital (AC1) 84,013 82,168  
Tier 2 Capital B      
Surplus Allowance and Eligible Deposits (SA + ED) 36,781 29,617 +24%
Base Solvency Buffer BSB 73,586 66,597 +10%
Total Ratio ([AC + SA + ED]/BSB) x 100 164% 168% -2%
Core Ratio ([AC1 + 70% SA + 70% ED]/BSB) x 100 149% 155% -4%

1) Regulated insurance holding companies and non-operating insurance companies

Explanation of Changes in Solvency Ratio in the Fourth Quarter of 2019:

In the fourth quarter of 2019, the Company’s base solvency buffer increased by 10% while surplus allowance and eligible deposits increased by 24%, which resulted in the LICAT Total Ratio decreasing by 2% in relative terms over this period.