Although Foresters, the Toronto-based fraternal benefits insurer, can’t compete head to head with the big players in some categories, it crushes its competition in at least one important area, says George Mohacsi, its president and CEO.

Foresters reported a minimum continuing capital and surplus requirements ratio of a whopping 432% — by far, the largest in Canada — on surplus capital of more than $1.3 billion as of Dec. 31, 2009, according to data from the Office of the Superintendent of Financial Institutions.

These days, there’s no question that people talk about this ratio, Mohacsi admits: “People ask about [financial ratings], your MCSRR, and your ability to fund the growth of the business. [The strength of Foresters’ balance sheet] has been highlighted by some of the issues that have been around the past while.”

Crudely put, the MCSRR is OSFI’s measurement of an insurance company’s ability to pay off its liabilities in the event of liquidation. And it’s this balance-sheet strength that has allowed Foresters to grow steadily in the past few years — mainly through acquisition, but also by investing in several smaller markets that have driven overall sales growth by about 50% across a variety of individual and group insurance products and through several distribution models, including funeral homes.

On the acquisition front, For-esters agreed to buy New York-based asset-management and life insurer First Investors Con-sol-idated Corp. in September. That firm has assets under management of US$6.6 billion, mostly in mutual funds and its variable annuities business. The deal also adds a registered broker-dealer, a registered investment advisor and a transfer agent south of the border.

“There’s a lot of people concerned about saving for retirement in the U.S. and in Canada,” Mohacsi says. “Strategically, we wanted to be in that market.”

Ironically, the variable annuities business is one that Mo-hacsi is thankful For–esters had avoided several years ago. Foresters had the option to concentrate on that product through its 2008 acquisition of Unity Life of Canada, which owned a small stable of segregated funds; but Mo-hacsi says candidly today that he’s thankful Foresters didn’t aggressively pursue that line of business: “That’s where you have guarantees, with living benefits; they drive capital requirements. And we just didn’t want to get into that.”

Mo-hacsi emphasizes that he isn’t throwing stones at the competition; but Toronto-based insurers Manulife Financial Corp. and Sun Life Financial Inc. , among others, have taken big earnings hits periodically over the past two years — mostly because of their large seg fund liabilities and the continued volatility in the equities markets, which fund those liabilities.

Instead of jumping into variable annuities, Mohacsi took Foresters down the road of specialization. Riding the success of its Unity Life purchase, Foresters aimed at carving a place in the middle market.

Unity Life brought Foresters distribution through 5,000 independent advisors for Foresters’ traditional stable of term, whole life and universal life products. Previously, the firm had sold policies through a captive agency group. Foresters has been tweaking and reintroducing those products periodically since the takeover.

“Sometimes, you make these acquisitions, and you have three or four reasons for making them,” says Mohacsi. “Sometimes, one or two of them work out. But in our case, I think we’ve met just about every objective we had with this transaction.”@page_break@Unity Life doubled Foresters’ consolidated assets in Canada to about $1 billion; since then, that figure has grown by 70% to about $1.7 billion, Mohacsi notes. This includes Unity Life’s acquisition of about 93,000 policies with a face value of about $300,000 from MetLife Canada — essentially MetLife Inc.’ s entire Canadian business — in 2009.

Unity Life also took over the Canadian block of business from Washington National Insurance Co. in 2008, shortly after that company was acquired by Foresters.

Judging by individual life and health insurance sales, some independent advisors have taken a shine to Foresters’ value proposition. When clients buy its products, they get membership in Foresters, life insurance benefits and access to scholarships for their children, among other perks.

Irene Shimoda, Foresters’ director of communications, notes that, year-over-year to the end of the second quarter ended on June 30, 2009, Foresters was among the top five in Canada new-premium growth on a percentage basis, according to data from LIMRA International Inc., formerly known as the Life Insurance and Market Research Association.

Admittedly, Foresters started from a lower base compared with the Big Five in Canada. But Foresters also was among the top five in new premiums for sales of individual critical illness insurance.

Foresters’ individual universal life sales this year aren’t as strong — at about 7% sales growth to the end of September — but Mohacsi underlines other, more successful areas: group creditor insurance sales, for one, are up by about 2.5 times. Distribution deals across the country through some credit unions, banks and mortgage lenders has led sales in that category.

Also, a joint marketing effort with a large independent network of funeral homes has generated sales growth in the so-called “pre-need” market niche. That’s industry-speak for simplified funeral expense insurance that’s sold by licensed representatives at funeral homes.

Another specialty: other simplified products marketed through Canada Protection Plan Inc. , a national managing general agency that sells products mostly over the phone through licensed reps.

Foresters has never made an effort to compete for national accounts at any of the Bay Street firms. Its overall marketing effort is squarely on delivering insurance products to middle-income clients in smaller communities in which Foresters invests with cash and services. Mohacsi notes that Foresters’ most recent community initiative is building playgrounds in the communities it services.

“We are a different insurer,” he says. “Some of our distribution partners get excited about what we do in the community. It really resonates with them.”

About 60% of Foresters’ premiums arrive via the U.S., where it has a presence through community branches. Another 15% comes from Britain, and the rest is from domestic business — where the company still considering its options for acquisitions because of its strong balance sheet, by the way.

Although Foresters has no imminent plans to step into the Canadian asset-management business, Mohacsi says, it fits with the firm’s strategy if the right opportunity came along. And Foresters would buy rather than develop its own platform.

Says Mohacsi: “We still have capital available to do acquisition in Canada.” IE