OLDWICK, N.J.--()--A.M. Best Co. has affirmed the financial strength rating of A (Excellent) and issuer credit rating of “a” of BMO Life Assurance Company (BMOLAC) (Toronto, Canada). The outlook for both ratings is stable.
BMOLAC is an indirect wholly owned subsidiary of Bank of Montreal (BMO) through BMO Life Insurance Company, an intermediate holding company. In 2009, BMO closed the acquisition of AIG Life Insurance Company of Canada (AIG Canada), and subsequently, converted AIG’s business platform and distribution to BMOLAC. BMOLAC underwrites a full suite of individual life insurance products including term life, whole life, universal life, critical illness and annuities. The company distributes its products across Canada through independent agents, as well as direct to consumer and workplace markets.
The ratings of BMOLAC consider the company’s stable underwriting performance and favorable risk-adjusted capitalization. A.M. Best believes BMOLAC is an important subsidiary of BMO as it represents a sizeable portion of BMO’s insurance business. BMOLAC also benefits from BMO’s capital support, which is expected to be provided on an as needed basis. Further supporting the ratings are the stability of the Canadian banking sector and BMOLAC during the financial crisis.
While recognizing the solid market position of the banking parent and BMOLAC’s stable profitable operations, A.M. Best notes the company’s overall modest market position in the concentrated Canadian life insurance marketplace, its historical earnings volatility and challenges associated with strengthening distribution channels and new product acceptance. It is A.M. Best’s opinion that BMOLAC may require parental support above what has historically been provided to meet its growth objectives, reflecting a somewhat limited financial flexibility on a stand-alone basis. Accordingly, BMOLAC’s ratings reflect the strength and explicit support provided by BMO.
The ratings for BMOLAC are considered well positioned at the current levels. A downward rating action could result from deterioration in the operating performance, capitalization or balance sheet strength or a downgrade of BMO.
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.
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