AM Best Affirms Royal Bank of Canada Insurance Company Ltd. Ratings with Stable Outlook

Strategic Insights -

Royal Bank of Canada Insurance Company Ltd. (RBCICL) has maintained its excellent financial strength rating and credit rating, affirmed by AM Best as A (Excellent) and "a+" (Excellent), respectively. The stable outlook reflects RBCICL's strong balance sheet, excellent operating performance, and neutral business profile. The company is a profitable subsidiary of Royal Bank of Canada (RBC), Canada's largest bank by market capitalization. RBCICL has successfully reinsured and managed Canadian Creditor Life, Longevity, and other international insurance products, aligning with its parent company's strategy.

Key Takeaways:

  • RBCICL maintains an A (Excellent) Financial Strength Rating and "a+" (Excellent) Long-Term Issuer Credit Rating, both with a stable outlook.
  • The company's balance sheet strength is assessed as very strong, supporting its excellent financial position.
  • RBCICL's strong operating performance, fueled by profitable reinsurance contracts, contributes to its high ratings.
  • The company's business profile is neutral, with reduced new business growth due to increased competition and market conditions.
  • RBCICL holds a contractual service margin liability for reinsurance contracts, which contributed to a decline in reported capital but will be released into earnings over time.
  • The parent bank, Royal Bank of Canada, has a strong organization with approximately CAD 127 billion in IFRS equity and over CAD 2 trillion in assets.
  • RBC earned approximately CAD 16 billion in net income on CAD 57 billion in revenue in fiscal-year 2024.
  • AM Best notes that RBC does not guarantee support but may provide additional capital at its discretion if RBCICL needs to maintain its risk-adjusted capitalization levels.
  • RBCICL transitioned to IFRS 17 reporting on November 1, 2023, which led to a decline in reported capital due to the contractual service margin liability.

Statistics:

  • CAD 127 billion: Royal Bank of Canada's IFRS equity at financial year-end 2024.
  • Over CAD 2 trillion: Royal Bank of Canada's assets.
  • CAD 16 billion: Royal Bank of Canada's net income in fiscal-year 2024.
  • CAD 57 billion: Royal Bank of Canada's revenue in fiscal-year 2024.
  • A (Excellent): RBCICL's Financial Strength Rating.
  • "a+" (Excellent): RBCICL's Long-Term Issuer Credit Rating.
  • 2024: Royal Bank of Canada's financial year-end.
  • November 1, 2023: The date Royal Bank of Canada Insurance Company Ltd. transitioned to IFRS 17 reporting.

Sources:

  • AM Best's Recent Rating Activity web page.
  • Guide to Best's Credit Ratings.
  • Guide to Proper Use of Best's Ratings & Assessments.
  • AM Best's press release.
  • BusinessWire: Royal Bank of Canada Insurance Company Ltd. Ratings Affirmed by AM Best.