AM Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “a+” of RBC Life Insurance Company (RBC Life) (Mississauga, Ontario). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect RBC Life’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
The company continues to produce favorable operating results in its core life business segment, despite the implications of a global pandemic environment, with added profitability from its group annuity line, which have both contributed to substantial surplus growth in recent years.
RBC Life operates as the Canadian life insurance operation of its ultimate parent, Royal Bank of Canada (RBC) [TSX and NYSE: RY], under RBC Insurance, a division of RBC. RBC Life’s earnings in fiscal-year 2020 reached a record high for the fifth consecutive year due primarily due to favorable investment-related gains from a U.S. bond diversification strategy. The company significantly expanded premiums written in its group annuity and wealth lines of business beginning in 2017, further diversifying its overall book of business and continuing to have a significant presence in Canada’s pension risk transfer market through 2020. In addition, the company’s Best’s Capital Adequacy Ratio (BCAR) improved to the strongest level in 2019, supported by further substantial growth in absolute capital from retained earnings.
Partially offsetting these positive rating factors are the challenges RBC Life still faces while positioning itself to increase market share in Canada’s competitive insurance environment, which is dominated by several larger organizations. Despite the diverse product portfolio offering universal life, traditional life, individual and group health, wealth and group annuity, RBC Life has still been largely dependent on its individual life insurance business for earnings as other lines continue to fluctuate by year.
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