Transamerica Life Canada has named a new chief investment officer after it posted its fourth quarterly loss in a row and a rating agency gave it a negative outlook.

Greg Ross, former senior vice president of fixed-income, takes the title of CIO, following Mark Jackson’s departure from the firm; Diane Meiers has been named interim chief financial officer; and Andrew Smith takes the role of vice president of finance.

Executives at the Toronto-based insurer would not discuss the appointments, the insurer’s recent financial performance or its sales and marketing strategies heading into the autumn and a new RRSP season.

But Bruce Hammond, president of Concord, Ont.-based managing general agent Performins Canada Inc. , was among several industry executives who stepped up to defend the insurer.

“Transamerica’s going through a tough time right now,” says Hammond. “I’m certain it’ll come through it and get back to where it used to be.”

In the first quarter ended March 31, 2008, Transamerica reported a $33-million loss to its parent, AEGON Americas, the unit that ultimately reports to Netherlands-based AEGON NV. The insurer’s second-quarter results were posted with the Office of the Superintendent of Financial Institutions during the last week of August (after Investment Executive went to press). Transamerica posted a $307-million loss for the year ended Dec 31, 2007.

In April, New Jersey-based rating agency A.M Best Co. lowered its insurance credit rating for the firm to A- (excellent) and the outlook to negative. The move was based on a large liability to segregated fund policyholders that comes due within the next year. The insurer had been shoring reserves to prepare for the payout, says Darien Halla, an analyst at the firm.

“It has been having ongoing reserving issues,” Halla says, “that mostly pertain to assumptions it made in the past regarding lapse assumptions, investment performance and mortality.”

Segregated fund products offer a principal guarantee feature that matures 10 years forward. Some seg fund products sold in the late 1990s offered various reset features that allowed policyholders to reset the guarantee amount, always extending the maturity date forward 10 years.

When markets dropped in the second half of 2000, Transamerica was left with the liability to policyholders that had used guarantee options on contracts to lock in market gains at the peak of the market. The 10-year time horizon on the products means they are coming due within the next year.

“Every year, it seems, Transamerica finds something else that’s not quite right and has to make adjustments,” Halla says. “We want to see that stop.”

Halla adds that the negative outlook means that another downgrade is possible. But the rating could stabilize with several sustained quarters without reserving issues or capital injection from AEGON.

On the positive side, Halla notes, Transamerica’s sales performance was relatively strong in 2007. It maintained a Top 5 position in many individual life product sales, and it was fifth in sales in the segregated funds category. (Although, he notes, Manulife Financial Corp., Sun Life Financial Inc, both of Toronto, and Great-West Life Assurance Co. of Winnipeg, combined, take 50% of the market,)

Similarly, Halla says Transamerica’s investment performance has been adequate.

The A.M. Best rating came on the heels of Standard & Poor’s Corp.’ s decision to lower the insurer’s financial rating for the second time in six months, to BBB from A- with a stable outlook. In its report dated a year ago, S&P cites “weak” enterprise risk management and more than $400 million in capital infusions from parent AEGON since 2003 to maintain the company’s regulatory capital reserve requirements.

Transamerica made changes to its portfolio hedging program, Halla says, and was granted some capital relief by OSFI in 2007, which allowed it to avoid another capital infusion from its parent.

The insurer also made changes to its business lines, bolstering its balance sheet by selling lines of business that it did not consider “core.”

In June, Toronto-based AEGON Canada Inc., a sister company to Transamerica, sold Money Concepts Canada Ltd., a mutual fund dealer with more than $2.8 billion in assets under management, to Quebec City-based Industrial Alliance Insurance and Financial Services Inc.. The deal included National Financial Insurance Agency Inc., the MGA through which Money Concepts advisors file their insurance business, as well as AEGON Dealer Services Inc., a smaller mutual fund dealer.

@page_break@Paul Reaburn, president and CEO of AEGON Canada, said at the time of the deal with IA that the divestiture would allow AEGON Canada to focus on the manufacturing of individual life insurance and annuity products.

Meanwhile, executives at some of Transamerica’s distributors acknowledge the carriers’ troubles, but remain optimistic that it can recover from a difficult period.

In support of the insurer, Terri DeFlorio, president of Woodbridge, Ont.-based MGA Hub Financial Inc., says that if Transamerica is in dire straights, it has not affected the support it gives Hub, or its service levels.

“We work well with Trans-america,“ she says, “and can always count on it to work with us to take advantage of opportunities or resolve problems effectively.”

Transamerica has struggled with its service in the past couple of years, but it has been focusing efforts on improvement lately, says Byren Innes, a senior vice president and director at Toronto-based Newlink Group Inc., an industry consultancy that surveys advisors on manufacturers’ service performance. IE