OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best Co. has upgraded the financial strength rating (FSR) to B (Fair) from B- (Fair) and issuer credit rating to “bb” from “bb-“ of Liberty Bankers Life Insurance Company (Liberty Bankers) (Oklahoma City, OK), and its wholly owned life insurance subsidiaries, The Capitol Life Insurance Company (Dallas, TX) and American Benefit Life Insurance Company (Oklahoma City, OK), together known as the Liberty Bankers Group. The outlook for the ratings is stable.
The rating upgrades reflect Liberty Bankers Group’s improved risk-adjusted capital trend over the past two years, driven by a recent reinsurance transaction with Athene Annuity & Life Insurance Company on its fixed annuity in-force block of business in late 2012 and an income-producing real estate contribution from its former parent Realty Advisors, Inc. in 2011. In addition, below investment grade bonds, real estate and the dollar amount of delinquent loans within Liberty Bankers Group’s direct commercial loan portfolio continue to decline, which has been viewed positively by A.M. Best. A.M Best also notes that the group has made progress in its efforts to balance annuity exposure with traditional life business. However, while management is also focused on reducing some of Liberty Bankers Group’s less liquid investments, A.M. Best remains concerned with its relatively high level of mortgage loans.
A.M. Best notes the recent legal separation of Liberty Bankers Group from Realty Advisors, Inc. effective year-end 2011. A.M. Best was concerned over the uncertainty regarding the financial condition of the real estate operations of Realty Advisors, Inc. and the impact it could have on Liberty Bankers Group given the current economic environment. However, A.M. Best believes that these concerns have been somewhat mitigated by the structural separation of the companies.
A.M. Best believes Liberty Bankers Group may experience positive rating movement if exposure to real estate-related investments (mortgage loans and real estate) is substantially reduced, core statutory earnings are sustainable, following the Athene reinsurance transaction, and the group’s business mix is balanced between interest sensitive and mortality business. However, the ratings and/or outlook may be under negative pressure if there is a deterioration of risk-adjusted capital, declining statutory results, material investment-related losses, or a meaningful increase in commercial mortgage loan delinquencies, or higher allocation to real estate linked assets.
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.
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