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.