Best’s News & Research Service - September 21, 2022 03:43 PM (EDT)
AM Best Downgrades Issuer Credit Rating of Grange Life Ins. Co.; Affirms Credit Ratings of Kansas City Life Ins. Co. and Its Sub
- September 21, 2022 03:43 PM (EDT)
Oldwick //BestWire// - AM Best has downgraded the Long-Term Issuer Credit Rating (Long-Term ICR) to “bbb” (Good) from “bbb+” (Good) and affirmed the Financial Strength Rating (FSR) of B++ (Good) of Grange Life Insurance Company (Grange Life) (Columbus, OH). The outlook of the FSR has been revised to negative from stable, while the outlook of the Long-Term ICR is negative. Concurrently, AM Best has affirmed the FSR of A- (Excellent) and the Long-Term ICR of “a-” (Excellent) of Kansas City Life Insurance Company (Kansas City Life). The outlook of these Credit Ratings (ratings) is negative. In addition, AM Best has affirmed the FSR of B++ (Good) and the Long-Term ICR of “bbb+” (Good) of Old American Insurance Company (Old American). The outlook of the Long-Term ICR is negative, while the outlook of the FSR is stable. All Companies are domiciled in Kansas City, MO unless otherwise specified. Both Grange Life and Old American are wholly owned subsidiaries of Kansas City Life.
The ratings of Grange Life reflect its balance sheet strength, which AM Best assesses as adequate, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management (ERM).
The downgrade of Grange Life’s Long-Term ICR reflects the revision in the balance sheet strength assessment to adequate from strong. Drivers of this change include the decline in Grange Life’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), and the increased volatility of that measure. Furthermore, AM Best has observed a trend of declining capital and surplus over the medium term. Furthermore, Grange Life has experienced an increase in mortality levels and has been impacted by an increase in universal life secondary guarantee reserves, both of which have driven the decrease in capital and surplus.
The ratings of Kansas City Life reflect its balance sheet strength, which AM Best assesses as very strong, as well as its marginal operating performance, neutral business profile and appropriate ERM.
The rating affirmations of Kansas City Life reflect the expectation that the impact of the deferred annuity reinsurance agreement, the reduction of dividends out of the operating insurance entities and the yield enhancing strategies implemented by management will stabilize declining capital and surplus levels, as measured by BCAR. Additional impacts of the reinsurance agreement are the narrowing of the asset liability mismatch present at Kansas City Life and the increased creditworthiness of the company’s reserve profile.
The ratings of Old American reflect its balance sheet strength, which AM Best assesses as strong, as well as its marginal operating performance, limited business profile and appropriate ERM.
The rating affirmations of Old American reflect the expectation that pricing initiatives for its final expense product and the implementation of new business reinsurance will reduce the impact of the strain on statutory capital and surplus driven by new sales. Furthermore, the reduction of dividends taken from Old American may provide the company with additional capital support and increase the company’s risk-adjusted capitalization measure.
The ratings of both Grange Life and Old American receive lift from the operating parent, Kansas City Life Group. If the rating of Kansas City Life Group should move lower, the ratings of both Grange Life and Old American could be downgraded as well.
This press release relates to Credit Ratings that have been published on AM 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 see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.