A.M. Best Co. has affirmed the financial strength rating of A+ (Superior) for Transamerica Life Canada.

The ratings service says the rating of the Toronto-based life insurer is based on its strategic role as the Canadian life insurance marketing arm of its ultimate parent, Aegon N.V.

It is A.M. Best’s expectation that the parent organization will maintain strong capitalization to support both growth and regulatory capital requirements as well as fund any significant adverse operating experience that may arise.

Additionally, the rating reflects Transamerica Life Canada’s increased market position through the acquisition and amalgamation of NN Life Insurance Company of Canada, combined with improved profitability and low cost structure.

A.M. Best says the NN Life acquisition positioned Transamerica Life as one of the leading providers of universal life and segregated fund products in Canada. Furthermore, the ratings service believes the acquisition benefits Transamerica Life by increasing its economies of scale, and improving its competitive position in product, distribution, technology and customer service.

A.M. Best expects company paretn Aegon N.V. to maintain capital at levels more than adequate to support the operating profile and investment mix of the company. Due primarily to new business growth, earnings levels have been modest. However, A.M. Best believes Transamerica Life’s growing segregated funds business, its low cost structure and improved expense efficiencies will result in enhanced profitability.

The ratings service says Transamerica Life remains dependent upon Aegon N.V. for financial support. Increasing exposure to the market volatility inherent in its expanding segregated fund portfolio may impact the level of future fee income and could subject the company to additional regulatory capital requirements.

A.M. Best concludes that Transamerica Life’s large and multi-channel distribution system should facilitate the achievement of its overall growth objectives. In addition, the company’s strategic alliances with mutual fund companies to market its segregated funds should generate continued growth in the company’s investment products segment.