Best’s News & Research Service - April 03, 2008 08:12 AM (EDT)
A.M. Best Assigns Ratings to Unity Life of Canada
OLDWICK, N.J. //BestWire// - A.M. Best Co. has assigned a financial strength rating (FSR) of A- (Excellent) and an issuer credit rating (ICR) of “a-” to Unity Life of Canada (Unity Life) (Mississauga, Canada). The outlook for both ratings is stable.
The acquisition of Unity Life was completed on April 2, 2008 by The Independent Order of Foresters (Foresters) (Toronto, Canada) following its sponsored demutualization. Unity Life will operate as a wholly owned subsidiary of Foresters. Concurrently, A.M. Best has affirmed the FSR of A (Excellent) and ICR of “a+” of Foresters. The outlook for these ratings is stable.
The ratings of Unity Life reflect its adequate risk-adjusted capitalization, diversified business profile and financial backing of its new parent, Foresters. A.M. Best notes that Unity Life will enable Foresters to enhance its presence in the Canadian life insurance market, which has been modest compared to its positions in the U.S. and U.K. markets. Unity Life will continue to focus on its traditional life insurance business through its MGA channel, as well as on its pre-need life insurance in Canada. On an historical basis, Unity Life’s business profile and operating results have been impacted by several acquisitions, mostly through purchases of inforce book of businesses.
Partially offsetting these factors are Unity Life’s challenges to continue to improve its operating performance and align Unity Life’s business goals and expectations with that of Foresters, its potential integration challenges relative to Foresters’ strategy and fraternal mission and the high level of competition in the Canadian insurance market.
The ratings of Foresters are based on its long established fraternal presence in Canada, diversified business profile that includes life insurance and asset accumulation businesses in the United States, United Kingdom and Canada and a strong risk-adjusted capitalization position, which includes access to free surplus to support new business initiatives.
Offsetting these factors are its modest earnings performance due to continuing expense overruns, modest success in growing its Canadian life insurance segment, unprofitable U.S. operations on a statutory basis primarily due to required deficiency reserves associated with strong terms sales in 2006 and 2007. A.M. Best will continue to monitor Foresters’ acquisition of Unity Life and Unity Life’s contribution to the organization relative to its financial projections going forward.
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