A.M. Best Co. has placed the financial strength rating of A (Excellent) of RBC Life Insurance Co. under review with negative implications.

This rating action is a result of today’s joint announcement by Provident Life and Accident Insurance Co and RBC Insurance of the sale of Provident’s Canadian operations to RBC Insurance. RBC Insurance will assume UnumProvident’s Canadian policy liabilities and may invest up to $500 million to complete the transaction and support the business in the future.

A.M. Best says the significant transaction took it by surprises and casts uncertainty on the acquisition strategy of RBC Life’s parent, the Royal Bank of Canada, with regards to its insurance operations. It says it had the opportunity to discuss the financing, level of capitalization going forward and revised operating plans with RBC management.

In October 2003, A.M. Best placed the financial strength ratings of Liberty Life Insurance Company and Business Men’s Assurance Co. of America under review with negative implications due to concerns over the level of capitalization. These companies are ultimately owned by the Royal Bank of Canada. This recent announcement causes further concern regarding the level of capitalization within the Royal Bank of Canada’s insurance operations.

A.M. Best anticipates these ratings will remain under review with negative implications until A.M. Best discusses with management the capital plans and acquisition strategy of the life insurance operations of the Royal Bank of Canada.