A.M. Best Co. has affirmed the financial strength ratings
of A (Excellent) and issuer credit ratings of “a” of the life/health
members of RBC Insurance Group (RBC Insurance): RBC Life
Insurance Company (RBC Life) (Mississauga, Ontario) and the U.S.
life insurance entity, Liberty Life Insurance Company (Liberty
Life) (Greenville, SC). The outlook for all ratings is stable.
RBC Life’s ratings reflect its strong risk-adjusted capitalization,
generally increasing premium trends, as well as the overall strength and
stability of RBC Insurance. RBC Life is the Canadian life insurance
operation of RBC Insurance, a division of Royal Bank of Canada (RBC)
(TSX and NYSE: RY). RBC Life maintains a significant position in the
individual living benefits and group long-term disability insurance
markets, where it is among the industry leaders. In addition, RBC Life
has focused on growing its individual life segments, primarily through
the sale of universal and term life. This growth has been accomplished
while the company has maintained a favorable risk-adjusted capital
position.
Partially offsetting these positive rating factors are the challenges
associated with RBC Life achieving greater market share in the Canadian
individual life arena, fluctuating earnings in the group and individual
accident and sickness markets. This is due to the strengthening of
morbidity assumptions and cyclical claims experience. Furthermore, RBC
Life maintains a modest position in the wealth management market through
its general account annuities and segregated funds. RBC Life also has
generated regular losses in its individual life line, with the exception
of its 2008 results. Earnings have been impacted by the front ended
costs related to new sales growth (strain) and the continued low
interest rate environment with improvements attributed to new product
enhancements. In addition, new premium and earnings growth may be
challenged by the downturn in the Canadian economy. However, A.M. Best
expects RBC to continue to support RBC Life’s growth initiatives, if
needed, as it has demonstrated in the past.
The ratings of Liberty Life recognize its good capitalization,
profitable operating results and ultimate ownership by RBC Insurance.
Liberty Life continues to benefit from its affiliation with RBC
including distribution opportunities afforded by other RBC companies in
the United States that provide investment, mortgage and banking
services.
