Best’s News & Research Service - July 31, 2015 02:33 PM (EDT)
A.M. Best Upgrades Ratings of Liberty Bankers Life Insurance Company and Its Subsidiaries
Oldwick //BestWire// - A.M. Best has upgraded the financial strength rating (FSR) to B+ (Good) from B (Fair) and the issuer credit ratings to "bbb-" from "bb+" of Liberty Bankers Life Insurance Company (Oklahoma City, OK), and its wholly owned life insurance subsidiaries, The Capitol Life Insurance Company (Dallas, TX) and American Benefit Life Insurance Company (Oklahoma City, OK), together known as the Liberty Bankers Group. The outlook for all ratings is stable.
The rating upgrades reflect Liberty Bankers Group's positive trend of increasing absolute capital with a five-year CAGR of 15.3% and significant improvement in risk-adjusted capital. The ratings also reflect management's actions to reduce investments in real estate-related investment classes and continuous work toward de-risking the asset portfolio. Additionally, Liberty Bankers Group's improved risk-adjusted capital reflects top-line and bottom-line growth due to organic growth and the acquisition of Continental Life Insurance Company and a reinsurance transaction with Landmark Life Insurance Company, both of which occurred in 2015. Additionally, the results reflect the favorable impact of an earlier in-force fixed annuity reinsurance transaction with Athene Annuity & Life Assurance Company. The 2014 core operating earnings reflect the top-line organic growth in the business and the management of new business surplus strain from the group's growth in its ordinary life business line.
Liberty Bankers Group has reduced its holdings of below investment grade bonds and real estate as a percentage of its investment portfolio, which is viewed positively by A.M. Best. Additionally, A.M. Best notes that the group has continued to make significant progress in its efforts to balance annuity exposure with traditional life business, evidenced by the recent acquisition of Continental Life Insurance Company, which complements its existing home service business, and the ordinary life reinsurance transaction with Landmark Life Insurance Company. However, while management is focused on reducing some of Liberty Bankers Group's less liquid investments, A.M. Best remains concerned with its relatively high level of commercial mortgage loans, in absolute terms and in relation to capital and surplus. Moreover, the Liberty Bankers Group has higher-than-average exposure to NAIC Class 2 investment grade bonds. There is also concern with regard to the level of non-performing assets such as mortgage loans, particularly in light of the current stable economic climate. Given management's expectation of maintaining current exposure levels to this asset class, A.M. Best believes Liberty Bankers Group is taking on additional credit exposure that could be exacerbated in a volatile economic environment.
This press release relates to rating(s) that have been published on A.M. 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 visit A.M. Best's Ratings & Criteria Center.
A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.