OLDWICK, N.J.--(BUSINESS WIRE)--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). Concurrently, A.M. Best has affirmed the Long-Term Issue Credit Rating (Long-Term IR) of “bbb+” on Empire Life’s CAD 300 million 2.87% subordinated unsecured fixed/floating debentures due May 31, 2023 and CAD 200 million subordinated debentures with an initial rate of 3.383% due Dec. 16, 2026. Additionally, A.M. Best has affirmed the Long-Term IR of “bbb” on Empire Life’s CAD 149.5 million non-cumulative rate reset Series 1 preferred shares. The outlook for each of these Credit Ratings (rating) 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.
Empire Life maintains a 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 and surplus levels. The strong level of capitalization has allowed Empire Life to retain more new business that is written with relatively low use of reinsurance to support growth. Empire Life has recorded consistently positive operating results over the last five years, including favorable results in 2016 due in part to its diversified revenue stream from the wealth management, insurance and 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 in response to 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 last 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 group 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.
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