(February 21 – 11:40 ET) – A.M. Best Co. has affirmed the A+ (Superior) financial strength rating of Clarica Life Insurance Co., headquartered in Waterloo, Ont.

The ratings agency also affirmed the A+ (Superior) financial strength rating of Clairca’s principal U.S. operating subsidiary, Clarica Life Insurance Co., based in Brookfield, Wis. In addition, the ratings on Clarica’s debt and preferred shares have been affirmed.

A.M. Best says the ratings reflect Clarica’s strong market positions in its core business lines in Canada, its well-established career agency force, improved operating performance, strong debt service capabilities and sound capitalization.

The ratings agency states that Clarica maintains strong market positions in its three core Canadian business segments: retail insurance, wealth management and group insurance. Furthermore, earnings have improved significantly over the last two years, reflecting the impact of acquisitions, the return to profitability of the group insurance line, better expense management and growth in its wealth accumulation segment.

A.M. Best believes the earnings and cash flow generated from Clarica’s insurance business and fee income from its segregated and mutual fund businesses are sustainable and strongly support the company’s long-term debt service capabilities.

Although A.M. Best believes the Canadian individual life insurance market offers little opportunity for growth and is increasingly competitive, Clarica’s participation in the consolidation of the Canadian insurance industry has enabled it to significantly increase market share and economies of scale. Having the advantage of a large career agency distribution, the company is well positioned to remain a strong player in the Canadian market.

The ratings agency believes Clarica may be challenged to increase its market position in the asset-accumulation market segment given its higher cost structure relative to larger players in the mutual fund and segregated fund arena. Likewise, new capital requirements for segregated fund business in Canada may result in greater price competition, reduced operating margins and higher required capital.

A.M. Best says Clarica’s strengths are offset by its business concentration in Canada and lack of diversified distribution channels in its Canadian retail insurance operations, which limit sales growth. Moreover, earnings growth is constrained by the lack of significant geographic diversification as the majority of its earnings are generated from insurance and asset accumulation businesses in Canada.