A.M. Best has affirmed Empire Life's financial strength and issuer credit ratings.

Last week, the ratings agency affirmed Empire's financial strength rating of A (Excellent), as well as its issuer credit rating of “a”. At the same time, A.M. Best also affirmed the issue rating of “bbb+” on the insurer's $300 million 2.87% subordinated unsecured fixed/floating debentures due May 31, 2023 and on its $149.5 million non-cumulative rate reset Series 1 preferred shares.

Significant equity exposure

A.M. Best warned that Empire does have "significant equity exposure" in its surplus account, segregated fund products, and its larger-than-peer equity holdings. It adds that the insurer's equity risk products (including those with guaranteed minimum withdrawal benefits) will continue to make its operating income potentially more volatile, and notes that persistently low interest rates have put pressure on the company's earnings. Overall, however, Empire's rating reflects its consistently profitable operations and favorable risk-adjusted capital.

Broad range of products

"Empire Life is among the 10 largest life insurance companies in Canada (based on general and segregated fund assets), although the company has a 6% market share or less in its three major product lines. The company markets a broad range of life insurance and investment products, employee benefit plans and financial services to individuals, professionals and the small-to-medium group market through multiple distribution channels," reads the ratings announcement. "In addition, Empire Life maintains a high quality and diverse set of assets that are enhanced by its growing surplus position and hedging program."