A.M. Best has affirmed the financial strength rating of A
(Excellent) and issuer credit rating of “a” of RBC Life Insurance
Company (RBC Life) (Mississauga, Ontario). The outlook for both
ratings is stable.
RBC Life’s ratings reflect its adequate risk-adjusted capitalization,
positive earnings in core business lines, as well as the strong brand
name recognition of the Royal Bank of Canada (RBC) [TSX and
NYSE:RY] in the Canadian market. RBC Life operates as the Canadian life
insurance operation of its parent, RBC, under RBC Insurance, a division
of RBC.
RBC Life maintains a significant market position in Canada in the
individual living benefits and group long-term disability insurance
markets. RBC Life also has maintained a focus on growing its individual
and group life segments through offering simplified products and
improving distribution efficiency. This has resulted in increased sales
of targeted insurance products through propriety distribution sources.
A.M. Best believes RBC will continue to support RBC Life’s growth
initiatives, if needed, as it has demonstrated in the past.
Partially offsetting these positive rating factors are the challenges
RBC Life faces while positioning itself to increase market share in the
Canadian individual life insurance marketplace, as well as the
continuing intense competition in the group and individual accident and
sickness markets. In addition, RBC Life’s earnings were negatively
impacted in 2013 by a one-time charge as a result of a tax legislation
change in Canada, which affects the policyholders’ tax treatment of
certain individual life insurance policies. A.M. Best also notes that
sales of individual life and living benefit products decreased in 2013,
driven by the suspension of sales of certain life products due to their
lower profitability.
The current ratings of RBC Life are adequately supported by key
financial measures surrounding risk-adjusted capitalization, operating
results and business profile for the near to medium term. Key factors
that could result in negative rating actions include a significant and
sustained decline in RBC Life's risk-adjusted capitalization, large
investment losses or operating performance on the individual and group
accident and sickness lines that does not meet A.M. Best's expectations
over a sustained period.
The methodology used in determining these ratings is Best’s Credit
Rating Methodology, which provides a comprehensive explanation of A.M.
Best’s rating process and contains the different rating criteria
employed in the rating process. Best’s Credit Rating Methodology can be
found at www.ambest.com/ratings/methodology.
A.M. Best Company is the world’s oldest and most authoritative
insurance rating and information source. For more information, visit www.ambest.com.
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