A.M. Best Co. has affirmed the financial strength rating of A+ (Superior) of The Canada Life Assurance Co. and its subsidiaries. Additionally, A.M. Best has assigned an initial financial strength rating of A+ (Superior) to Canada Life Insurance Co. of Puerto Rico, Inc., based in Guaynabo, Puerto Rico. The rating outlooks are stable.

According to the ratings agency, the ratings reflect the excellent market positions of a number of Canada Life’s product segments and business units, as well as its strong capitalization and geographically diverse product lines provided by operations in Canada, the United States, the United Kingdom, the Republic of Ireland, the Caribbean, Brazil and Germany. Partially offsetting these strengths are the challenges to improve profitability in the U.K. operation, to continue marketing momentum in the U.S. protection business and sustain its market positions in Canada, in light of continued industry consolidation.

Canada Life and its subsidiaries maintain strong market positions in a number of business segments worldwide. In recent years, Canada Life’s market positions have been further enhanced by strategic acquisitions, which have allowed it to develop an ability to integrate acquired blocks of business, expand distribution capacity and improve its economies of scale within its various insurance operations.

Canada Life’s risk-adjusted capitalization is favorable for its current insurance and investment risks and has been enhanced by its strong asset/liability management. In recent years, despite the impact of the weak economy and volatile equity markets, the company’s operating performance has been favorably enhanced by growth in new and existing businesses and improved operating efficiencies.

Canada Life has continued to build on its product and geographic diversification by establishing Canada Life Insurance Co. of Puerto Rico, Inc., which further develops its existing Puerto Rico and U.S. Virgin Islands businesses that focus on group life and health products. Through this company, A.M. Best believes Canada Life will be better positioned to provide excellent local Caribbean service, which will enhance its sales opportunities while providing additional tax efficiencies.

In A.M. Best’s opinion, Canada Life will be challenged to improve financial performance in the United Kingdom as a result of intense competition and the stringent U.K. regulatory environment. However, its solid local U.K. management team and its growth in distribution relationships with Independent Financial Advisors somewhat mitigate these challenges. Furthermore, although Canada Life has achieved marketing momentum in the U.S. protection business in recent years — which is partially attributed to the significant expansion of its group sales offices — A.M. Best believes this operation needs greater scale. While recent acquisitions have improved Canada Life’s U.S. presence, lack of adequate size and economies of scale present obstacles in achieving critical mass in this market.