A.M. Best Co. has assigned an A (Excellent) financial strength rating to RBC Life Insurance.

The ratings agency says this initial rating is based on the strength of RBC Life’s capitalization, diversified distribution channels and profitable operations as well as the overall strength and stability of both RBC Insurance and Royal Bank of Canada. RBC Life is a division of RBC Insurance.

A.M. Best says the capitalization of RBC Life is adequate for the current insurance and investment risks presently accepted.

It notes that RBC Life was a significant contributor to the overall operations of RBC Insurance, generating more than $350 million in premiums in 2000.

A.M. says Royal Bank has demonstrated a strong commitment to its insurance operations, and notes that the bank has provided ongoing support to the insurance business for start-ups and acquisitions. The most recent example is the expansion of its insurance presence outside of Canada with the acquisitions of Liberty Life Insurance Co. and Liberty Insurance Services Corp., both based in South Carolina.

A.M. Best expects Royal Bank to continue to support RBC Life’s growth initiatives, however, it does not expect the current capitalization levels on a risk adjusted basis, to strengthen in the future.

Although A.M. Best believes RBC Life faces considerable challenges in building a more significant market share in universal life and achieving needed economies of scale in the highly competitive Canadian individual life insurance market, the company has demonstrated its ability to grow historically through both acquisitions and internally generated revenue sources.