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FOR IMMEDIATE RELEASE
OLDWICK - JUNE 07, 2018 10:37 AM (EDT)
A.M. Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” of The Empire Life Insurance Company (Empire Life) (Kingston, Ontario, Canada). The outlook of these Credit Ratings (ratings) is stable. Concurrently, A.M. Best has assigned a Long-Term Issue Credit Rating (Long-Term IR) of “bbb+” to the CAD 200 million subordinated debentures with a fixed/floating rate of 3.664% due March 15, 2028. The outlook assigned to this rating is stable. Additionally, A.M. Best has affirmed the Long-Term IR of “bbb+” of Empire Life’s CAD 200 million subordinated debentures with a fixed/floating rate of 3.383% due Dec. 16, 2026, and “bbb” on Empire Life’s CAD 149.5 million non-cumulative rate reset Series 1 preferred shares. The outlook of these ratings is stable. Empire Life is a subsidiary of E-L Financial Corporation Limited (E-L Financial), which operates as a publicly traded Canadian investment and insurance holding company.
The ratings reflect Empire Life’s balance sheet strength, which A.M. Best categorizes as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
Empire Life maintains a very favorable risk-adjusted capital position, which supports its business and investment risks. Risk-adjusted capitalization is enhanced by the high credit quality of its investment portfolio, and generally continual increases in aggregate capital levels due to favorable earnings and recent debt issuances. The excess capitalization has allowed Empire Life to support growth while maintaining or exceeding stressed capital levels. Empire Life has recorded consistently positive operating results over the past five years, including favorable results in 2017 due in part to its diversified revenue stream from the wealth management and insurance segments, and solid results from the group benefits segments. In recent years, the company expanded its distribution channels and marketing, which resulted in more diversified revenue streams. The company has modified its product suite and pricing to meet the current economic, regulatory and competitive landscape.
Conversely, Empire Life retains a fair amount of segregated fund assets, which exposes the company to equity market volatility. However, A.M. Best notes that the policies offered by the company are more conservative than some of its peers in the Canadian life industry and have been modified over the past several years to reduce the tail-end risk. In addition to having equity market risks within its product portfolio, Empire Life maintains a higher allocation of equity investments than its peers within the company’s general account investment portfolio. Empire Life continues to face challenges in expanding its operations in its core business lines as a result of continued competition. This is especially the case within the individual insurance segment, where A.M. Best believes the company could be challenged to improve earnings and market share against competitors that have larger scale. Despite these challenges, Empire Life’s focus on the smaller employee market niche has been successful and helps mitigate this risk. In addition, the company continues to improve branding and its digital experience for agents and clients, which should assist in improving Empire Life’s visibility and help differentiate it from its competitors.
This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.
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