OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best Co. has revised the outlook to stable from negative and affirmed the financial strength rating of B++ (Good) and the issuer credit rating of “bbb” of LifeShield National Insurance Co. (LifeShield) (Oklahoma City, OK).
The revised outlook reflects LifeShield’s positive trends in overall operating performance during the past three years, improvements in both absolute and risk-adjusted capitalization, as well as significant reductions in realized investment losses, which increased significantly during the recent financial crisis.
The affirmation of the ratings reflects LifeShield’s more than adequate risk-adjusted capitalization relative to its current ratings and continued positive net income and premium growth. The ratings also reflect the continued benefits derived from LifeShield’s relationships with MidFirst Bank and Midland Mortgage, a division of MidFirst Bank, which provide a stable market base for LifeShield's business growth.
Partially offsetting these positive rating factors are LifeShield’s heavy dependence on a single partnership for net premiums and the challenges to improve its net operating performance and to manage its modest level of absolute capital. Additionally, A.M. Best notes that the company's bond portfolio includes a material allocation to Trust Preferred Securities, most of which are categorized by the NAIC as in or near default. While A.M. Best acknowledges the unrealized gains recognized in the company’s surplus from these securities in 2012, it remains concerned that an increase in bank defaults or a general downturn in the U.S. economy could expose LifeShield to some asset impairments, place downward pressure on both its absolute and risk-adjusted capitalization and reduce its financial flexibility.
A.M. Best believes LifeShield is well positioned at its current rating level over the near to medium term. Key factors that could lead to negative rating actions include a decline in LifeShield’s absolute and risk-adjusted capitalization that materially limits its financial flexibility and no longer supports its current rating level, higher than expected investment losses, net earnings trends that do not meet A.M. Best’s expectations or a meaningful decline in its net premium growth.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.
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