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OLDWICK, N.J.–(BUSINESS WIRE)–AM Best has upgraded the Financial Strength Rating (FSR) to B+ (Good) from B (Fair) and the Long-Term Issuer Credit Ratings (Long-Term ICR) to “bbb-” from “bb+” of Nassau Life Insurance Company and PHL Variable Insurance Company, collectively known as Nassau Insurance Group. Concurrently, AM Best has upgraded the FSR to B+ (Good) from B (Fair) and the Long-Term ICRs to “bbb-” from “bb+” of Nassau Life and Annuity Company, Nassau Life Insurance Company of Kansas (Overland Park, KS) and Constitution Life Insurance Company (Houston, TX). In addition, AM Best has upgraded the Long-Term ICR to “b+” from “b” of The Nassau Companies of New York, Inc. (Nassau of NY) and upgraded its existing Long-Term Issue Credit Ratings (Long-Term IRs). The outlook of these Credit Ratings (ratings) remains stable. All companies are headquartered in Hartford, CT, unless otherwise specified. (See below for a detailed listing of the Long-Term IRs.)
The ratings of Nassau Insurance Group reflect its balance sheet strength, which AM Best categorizes as adequate, as well as its marginal operating performance, neutral business profile and appropriate enterprise risk management (ERM). The rating upgrades reflect the group’s improved ERM capabilities including improved internal controls as demonstrated by the recent remediation of all remaining material weaknesses inherited at the time of the acquisition of Nassau of NY. Nassau Insurance Group also maintains a formal risk appetite statement with defined risk tolerances and limits. Stress testing and sensitivity analysis under multiple scenarios also are performed.
The group continues to maintain a strong level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), as well as improved liquidity, with the addition of access to a Federal Home Loan Bank credit facility, access to approximately $140 million in cash and short-term investments at Nassau of New York and increased dividend capacity at Nassau Life Insurance Company, as well as access to committed capital from the group’s ultimate parent.
While liquidity has improved at PHL Variable Insurance Company, it has experienced significant losses in recent periods primarily due to increasing mortality in its universal life insurance line of business, and additional capital contributions likely will be needed over the near term. In addition, operating results for the overall Nassau Insurance Group have fluctuated over the past several years in part due to costs associated with the resolution of all material legacy litigation, as well as increased mortality in its universal life insurance block and several one-time events. Furthermore, premiums had been declining for a number of years due to a focus on improving capitalization and liquidity while developing a suite of new products for the marketplace. AM Best notes that premiums have increased over the most-recent period primarily due to an increase in annuity sales. AM Best expects a general improvement in the company’s operating performance over the medium term, as management continues to focus on streamlining operations and investing in growth as it re-enters the marketplace with new products.
The following Long-Term IRs have been upgraded with stable outlooks:
The Nassau Companies of New York, Inc.—
–to “b+” from “b” on $300 million 7.45% senior unsecured notes, due 2032 (approximately $253 million outstanding)
Nassau Life Insurance Company—
–to “bb-” from “b+” on $175 million 7.15% surplus notes, due 2034 (approximately $126 million outstanding)
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 Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media – Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
AM Best is a global rating agency and information provider with a unique focus on the insurance industry. Visit www.ambest.com for more information.
Copyright © 2019 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.
Oldwick – AM Best has revised the outlooks to positive from stable and affirmed the Financial Strength Rating (FSR) of B+ (Good) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “bbb-” of Investors Heritage Life Insurance Company (IHLIC) (Frankfort, KY), which is subsidiary of Aquarian Investors Heritage Holdings LLC (Aquarian).
The ratings reflect IHLIC’s balance sheet strength, which AM Best categorizes as strong, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management (ERM).
The positive outlooks reflect an improved balance sheet assessment, which AM Best characterizes as strong due to improved risk-adjusted capitalization levels, as measured by Best’s Capital Adequacy Ratio (BCAR), reduced reinsurance leverage, and a reduction in investment risk due to decreased exposure to NAIC Class 2 bonds and reduced equity allocations. The company’s risk-adjusted capitalization levels improved due to the gain on the sale of affiliated stock of Investors Heritage Capital Corporation (IHCC) in conjunction with its acquisition by Aquarian in 2018, as well as an additional capital contribution made by Aquarian in the same year. IHCC also reduced its reinsurance leverage significantly by recapturing business from an unrated reinsurer.
Operating performance has been marginal historically due to lack of premium growth and low return metrics, but IHLIC has reported significant growth in its premiums last year due to the launch of a new multi-year guaranteed fixed deferred annuity product and has reversed a trend of declining premiums from 2013-2017.
However, operating performance remains constrained given sales acquisition costs and narrow spreads on its recently introduced fixed annuity product given high crediting rates.
While the company’s business profile is assessed as limited given its historical focus as a preneed and final expense writer with high geographic concentration, it is evolving as it migrates toward annuity products and expands geographically. IHLIC’s ERM is considered to be appropriate and has improved under its new ownership structure.
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 Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media – Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
AM Best is a global rating agency and information provider with a unique focus on the insurance industry.
