OLDWICK, NJ–(BUSINESS WIRE)–am the best has downgraded the Long-Term Issuer Credit Rating (Long-Term ICR) from bbb+ (Good) to bbb (Good) and the Financial Strength Rating (FSR) from Grange Life Insurance Company (Grange Leben) to B++ (Good). ) (Columbus, OH). The FSR outlook has been changed to negative from stable, while the long-term ICR outlook is negative. At the same time, AM Best has certified Kansas City Life Insurance Company’s (Kansas City Life) FSR of A- (excellent) and long-term ICR of “a-” (excellent). The outlook of these credit ratings (ratings) is negative. In addition, AM Best has confirmed the Old American Insurance Company’s FSR of B++ (good) and long-term ICR of bbb+ (good) (Old American). The long-term ICR has a negative outlook, while the FSR has a stable outlook. All companies are based in Kansas City, MO, unless otherwise noted. Both Grange Life and Old American are wholly owned subsidiaries of Kansas City Life.
Grange Life’s ratings reflect its balance sheet strength, which AM Best considers reasonable, its marginal operating performance, limited business profile and adequate enterprise risk management (ERM).
The downgrade of Grange Life’s long-term ICR reflects the change in the balance sheet strength rating from ‘strong’ to ‘fair’. 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 this metric. In addition, AM Best observes a trend towards falling capital and surpluses in the medium term. In addition, Grange Life has experienced an increase in mortality rates and has been impacted by an increase in secondary guarantee reserves for universal life insurance, both of which have resulted in a decrease in capital and surplus.
Kansas City Life’s ratings reflect its balance sheet strength, which AM Best rates as very strong, its marginal operating performance, its neutral business profile and an adequate ERM.
Kansas City Life’s rating affirmations reflect the expectation that the impact of the deferred annuity reinsurance agreement, dividend cuts from operating insurance units and earnings-enhancing strategies implemented by management will stabilize declining capital and excess levels as measured by BCAR. Additional benefits of the reinsurance agreement include reducing Kansas City Life’s asset-liability mismatch and improving the creditworthiness of the company’s reserve profile.
Old American’s ratings reflect its balance sheet strength, which AM Best considers strong, its marginal operating performance, limited business profile and adequate ERM.
Old American’s rating affirmations reflect the expectation that pricing initiatives on its retail cost product and the introduction of reinsurance on new business will reduce the impact of new sales-related legal capital and surplus strain. Additionally, cutting Old American’s dividends may provide the company with additional capital support and increase the company’s risk-adjusted capitalization measure.
Grange Life and Old American’s ratings are being upgraded by the parent operating company, the Kansas City Life Group. Should Kansas City Life Group’s rating move down, Grange Life and Old American could also be downgraded.
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