AM Best


A.M. Best Affirms Ratings of The Empire Life Insurance Company


CONTACTS:

Edward Kohlberg
Senior Financial Analyst
(908) 439-2200, ext. 5664
edward.kohlberg@ambest.com

Thomas Rosendale
Assistant Vice President
(908) 439-2200, ext. 5201
thomas.rosendale@ambest.com

Christopher Sharkey
Manager, Public Relations
(908) 439-2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Assistant Vice President, Public Relations
(908) 439-2200, ext. 5644
james.peavy@ambest.com

FOR IMMEDIATE RELEASE

OLDWICK - MAY 19, 2015 02:11 PM (EDT)
A.M. Best has affirmed the financial strength rating of A (Excellent) and the issuer credit rating of "a" of The Empire Life Insurance Company (Empire Life) (Kingston, Ontario, Canada). Concurrently, A.M. Best has affirmed the debt rating of "bbb+" on the CAD 300 million 2.87% subordinated unsecured fixed/floating debentures due May 31, 2023 of Empire Life. The outlook for all ratings is stable. Empire Life is a subsidiary of E-L Financial Corporation Limited (E-L Financial) (Toronto, Ontario, Canada), which operates as a publicly traded Canadian investment and insurance holding company.

The rating affirmations reflect Empire Life's favorable risk-adjusted capital position, continued earnings growth and sustainable market presence in Canada with multiple lines of business. The company's risk-adjusted capitalization is enhanced by the high credit quality of its investment portfolio and favorable operating performance. Empire Life has continued to produce solid operating results due to favorable market returns, improved performance in the wealth management segment and less business strain as the company focuses on sales of less interest sensitive business. In addition, Empire Life's leverage ratios, which have decreased due to a recent debt redemption, remain within the range that supports its current ratings.

Offsetting rating factors include Empire Life's exposure to equity market risk in its general account and segregated fund products, including those with guaranteed minimum withdrawal benefits. However, A.M. Best notes that in 2014 Empire Life established an equity market hedging program to partially hedge the benefits on its segregated fund products to help reduce the volatility in capital requirements on this block of business. In addition, Empire Life may continue to face challenges in expanding its operations in its core business lines due to competition from larger Canadian life insurance companies. Similar to other life insurers in Canada, Empire Life faces challenges due to the continued low interest rate environment.

A.M. Best believes that positive rating actions are unlikely in the near to medium term. Key factors that could result in negative rating actions include deterioration in the financial strength of E-L Financial, a significant decline in its risk-adjusted capitalization and/or operating performance that does not meet A.M. Best's expectations over a sustained period.

The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Key insurance criteria reports utilized:


  • Equity Credit for Hybrid Securities

  • Evaluating Non-Insurance Ultimate Parents

  • Insurance Holding Company and Debt Ratings

  • Rating Members of Insurance Groups

  • Risk Management and the Rating Process for Insurance Companies

  • Understanding BCAR for U.S. and Canadian Life/Health Insurers

This press release relates to rating(s) 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 visit A.M. Best's Ratings & Criteria Center .

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.


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