AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of "a" of BMO Life Assurance Company (BMOLAC) (Toronto, Canada). The outlook of these Credit Ratings (ratings) is stable. BMOLAC is ultimately owned by the Bank of Montreal.
The ratings reflect BMOLAC’s balance sheet strength, which AM Best categorizes as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
BMOLAC underwrites a full suite of insurance products, including term life, whole life, universal life, critical illness, structured settlements and annuities. The company distributes its products through a large network of sales agents across Canada, and through direct-to-consumer channels.
BMOLAC maintains a risk-adjusted capitalization level similar to the previous year, and AM Best assesses it as strongest, as measured by Best’s Capital Adequacy Ratio (BCAR), which is demonstrated further by a favorable Life Insurance Capital Adequacy Test (LICAT) ratio. Despite the macro economic slowdown resulting from the COVID-19 pandemic causing a decline in premium growth particularly within the pension risk transfer and structured settlement space, BMOLAC’s operating results remain profitable through the third quarter of 2020. The company has achieved favorable results over the long term, with a five-year average return on equity of nearly 13%.
Partially offsetting these positive rating factors is the continued competition BMOLAC faces from larger insurance organizations to increase its market share in Canada’s mature and concentrated marketplace. Asset-liability matching on BMOLAC’s long-duration book of business in a low interest rate environment also remains a challenge. Finally, the company paid a $150M CAD dividend in 2020 to the parent, and management has expressed a desire to manage capital more closely to internal LICAT targets, which will likely reduce BCAR scores going forward. AM Best notes that despite this decline in capital, the projected BCAR scores still result in a very strong level of risk-adjusted capitalization.
This press release relates to Credit Ratings that have been published on AM 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
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