A.M. Best Affirms Rating of Royal Bank of Canada Insurance

July 21, 2003

A.M. Best Co. has affirmed the financial strength rating of A (Excellent) of Royal Bank of Canada Insurance Company Ltd., (RBCI) (St. Michael, Barbados). The rating has a stable outlook.
The rating for RBCI reflects its prudent capitalization, excellent underwriting and operating performance, sound investment portfolio and balance sheet liquidity. The rating also considers the stability and expertise that the company receives from its ultimate parent company, Royal Bank of Canada.

RBCI benefits from a broad geographical spread of risk, which compliments its diverse product mix as its book of business includes reinsurance and retrocession for life, property and structured business. As a result of its conservative operating practices, RBCI has consistently generated above average returns.

Partially offsetting these rating strengths are challenges in its property and structured reinsurance portfolios due to catastrophic activities. In addition, the low interest rate environment has affected RBCI’s investment yield in recent years. However, RBCI is currently repositioning its property portfolio, and a hardening reinsurance market should help turn around its performance. Its core business, life retrocession, continues to consistently generate excellent results, which will further enhance RBCI’s financial strength.

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