AM Best Improves EquiTrust Life Insurance Company Issuer Credit Rating

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OLDWICK, NJ–(BUSINESS WIRE)–AM Best upgraded the long-term issuer credit rating (long-term ICR) from “bbb” (good) to “bbb” (good) and affirmed the financial strength rating (FSR) of B++ (good) of EquiTrust Life Insurance Company (EquiTrust) (Chicgao, IL). The outlook for the long-term ICR has been revised from positive to stable, while the outlook for the FSR is stable.

The credit ratings (ratings) reflect EquiTrust’s balance sheet strength, which AM Best assesses as adequate, as well as its strong operating performance, neutral business profile and appropriate management of business risks.

The upgrade in the long-term ICR reflects a trend of increasing EquiTrust’s risk-adjusted capitalization level, as measured by Best’s capital adequacy ratio (BCAR). EquiTrust had previously maintained a relatively low level of risk-adjusted capital compared to its peers, primarily due to dividends paid to shareholders at its parent company. However, the company’s risk-adjusted capitalization has increased in recent years due to a capital injection from its parent company, a lack of dividends to shareholders and a trend of favorable operating results. . The company also maintains a strong liquidity profile with strong cash flow from operations, very good surrender protection for in-force annuity contracts and additional borrowing capacity through the Federal Home Loan Bank. Overall premiums have increased significantly in recent periods, although there has been a decline in 2021 due to lower annuity sales due to lower credit rates in the low interest rate environment .

The company also continues to build new distribution relationships, which should drive further sales growth in the short to medium term.

The absence of audited financial statements from its parent company and uncertainty about its dividend requirements partly offset these positive factors. EquiTrust also maintains a relatively high level of reinsurance leverage with unrated insurance companies, although this has declined in recent periods. Although the company has had favorable operating performance in recent periods, there has been some volatility in the past. However, interest rate spreads remained favorable due to relatively stable investment returns despite pressures from the low interest rate environment. AM Best notes that the company maintains some concentration in structured securities, which currently make up only about a quarter of the general account’s investment portfolio. To partially mitigate this concern, the investment portfolio is well managed with good diversity by sector with only a modest number of writedowns over the past two years.

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 relevant 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 more information on the use and limitations of credit rating opinions, please see Best’s Guide to Credit Ratings. For more information on the proper use of Best’s Credit Scores, Best’s Performance Ratings, Best’s Preliminary Credit Ratings, and AM Best’s press releases, please see the Guide to Proper Use of Best’s Best ratings and reviews.

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 more than 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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