AM Best Affirms Credit Ratings of BMO Life Assurance Company

AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” (Excellent) of BMO Life Assurance Company (BMOLAC) (Toronto, Canada). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect BMOLAC’s balance sheet strength, which AM Best assesses 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 has focused on its growing book of pension buyout business, which also provides additional revenue diversification. The company distributes its products through a large network of sales agents across Canada and direct-to-consumer channels. BMOLAC is ultimately owned by Bank of Montreal.

BMOLAC’s risk-adjusted capitalization is maintained at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), which is further supported by its favorable Life Insurance Capital Adequacy Test (LICAT) ratio. BMOLAC’s favorable risk-adjusted capitalization has been driven primarily by strong operating results over the long term, with a five-year average return-on-equity ratio of nearly 12%. AM Best has observed continued earnings growth and steady premiums for BMOLAC along with solid market positions in diversified product lines such as pension buyouts, structured settlements, segregated funds and life insurance. AM Best notes that in prior years, BMOLAC paid significant dividends to its parent company; however, BMOLAC did not upstream any dividends in 2022, which contributed to the increase of the company’s risk-adjusted capitalization.

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, as well as managing a book of business with long duration and significantly increased longevity risk exposure over recent years. AM Best notes that these challenges have been managed by the company with success in the past few years.

BMOLAC’s stable outlooks reflect AM Best’s expectation that the company will maintain a balance sheet strength assessment in the very strong range over the medium term. The trend of continued favorable operating results is also expected to support risk-adjusted capitalization, which may be offset by any future dividends paid to the parent.

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 use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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