Best’s News & Research Service - September 05, 2008 04:37 PM (EDT)
A.M. Best Affirms Ratings of Americo Life, Inc. and Its Subsidiaries; Upgrades Investors Life Insurance Company of North America
OLDWICK, N.J. //BestWire// - A.M. Best Co. has affirmed the financial strength rating (FSR) of A- (Excellent) and the issuer credit rating (ICR) of “a-” of Americo Financial Life and Annuity Insurance Company (AFL) (Dallas, TX) and its key life/health affiliate. (See link below for a detailed listing of the companies and ratings.) Additionally, A.M. Best has affirmed the ICR of “bbb-” and the debt rating of “bbb-” on the $125 million of 7.875% senior unsecured notes of Americo Life, Inc. (Americo) (Kansas City, MO).
Concurrently, A.M. Best has removed from under review and upgraded the FSR to B+ (Good) from B (Fair) and ICR to “bbb-”from “bb” of Investors Life Insurance Company of North America (ILNA) and has withdrawn the ICR of “b-” of Financial Industries Corporation (FIC). Both companies are domiciled in Austin, TX. These ratings were placed under review with positive implications on January 16, 2008, following the announcement that FIC had reached an agreement in principle to merge with Americo. The merger subsequently closed on July 17, 2008. The outlook for all ratings is stable.
The ratings reflect Americo’s improved statutory profitability, continued growth in GAAP earnings driven by strong sales of term life insurance, favorable mortality experience, moderate financial leverage and adequate coverage. Additionally, the consolidated capital position of Americo’s statutory entities has continued to improve, although its risk-adjusted capitalization as measured by Best’s Capital Adequacy Ratio (BCAR) has declined due to the use of surplus notes in conjunction with the acquisition of FIC.
Partially offsetting these positive rating factors are Americo’s substantial use of reinsurance, total statutory capital to liabilities that is well below the industry average, an above average intangible assets-to-equity ratio, the highly competitive conditions in AFL’s core individual life and annuity lines and its exposure to equity market and interest rate risk from its interest-sensitive life and annuity liabilities. Additionally, the SEC’s recently proposed rule change that would regulate fixed-indexed annuities as securities could pressure Americo’s ability to grow annuity deposits.
The upgrade of ILNA’s ratings reflects the greater financial flexibility resulting from its ownership by AFL, somewhat offset by Americo’s plans to manage ILNA’s current inforce business of individual life and annuities as run-off blocks. The withdrawal of FIC’s ICR reflects Americo’s intentions to no longer utilize this entity and to eventually separate it from ILNA’s operations.
For a complete listing of Americo Life, Inc.’s FSRs, ICRs and debt ratings, please visit http://www.ambest.com/press/090504americo.pdf.