(September 29 – 11:30 ET) -A.M. Best Co. has affirmed the A (Excellent) financial strength rating of The Empire Life Insurance Company.
Best says the rating reflects the Kingston, Ont.-based company’s strong capitalization and stable earnings from its core individual life insurance business. The rating also considers Empire Life’s wholly owned subsidiary, Concordia Life Insurance Co. of Toronto, which offers Empire Life additional growth opportunities and better economies of scale.
In affirming the rating, Best says earnings from Empire Life’s large, stable block of non-participating life business has enabled the company to build a strong capital base. Empire Life has had success in growing its segregated funds business, resulting in higher fee revenues. However, recent heightened competition in this market segment has resulted in a significant slow-down in sales and the growth of Empire Life’s segregated funds portfolio. Best says it believes continued slow sales would ultimately result in lower segregated fund balances and reduced fee income, pressuring future earnings expansion.
Empire Life has a niche position in the small group benefits market, where it has been active for many years. Best says the company’s marketing is enhanced with a packaged plan designed specifically for small groups and tailor-made programs for large groups. However, operating losses have been reported in recent years. Best believes Empire Life will be challenged to offer competitively priced, profitable products in the small group marketplace.
Best describes the life insurance market in Canada as mature. It says the market is challenging Empire Life and Concordia Life to increase new premium life insurance volume. In addition, both companies will find it difficult to attract new clients for their segregated fund products, as other insurers have aggressively expanded fund options and offer more aggressive guarantees.
Best also affirmed the A- (Excellent) rating of Concordia Life Insurance Company.
-IE Staff