AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a+” (Excellent) 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.
RBC Life is owned ultimately by Royal Bank of Canada (RBC), the largest bank in Canada, as measured by market capitalization. RBC Life operates as the Canadian life insurance operation of RBC [TSX and NYSE: RY], under RBC Insurance, the brand name for the insurance operating entities of RBC.
RBC Life’s risk-adjusted capitalization is assessed at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), primarily due to a trend of strong operating earnings. This contributes to the company’s very strong balance sheet strength assessment. RBC Life produces favorable operating results across each of its core product lines, with the individual life business segment continuing to contribute the majority of earnings. RBC Life’s earnings in fiscal-year 2022 strengthened after falling slightly in 2021, after achieving five consecutive years of record net income between 2016 and 2020, largely attributed to more-favorable-than-projected 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 strong presence in Canada’s pension risk transfer market through 2022.
Partially offsetting these positive rating factors are the challenges RBC Life still faces while positioning itself to gain 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, group annuity, segregated funds, and individual and group health; RBC Life has still been dependent largely on its individual life insurance business for earnings as other lines continue to fluctuate by year.
The stable outlooks reflect the company’s very strong balance sheet strength assessment that has exhibited a trend of improving risk-adjusted capitalization in recent years coupled with strong operating performance from improving top-line growth and investment-related earnings.
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