Best’s News & Research Service - October 02, 2015 12:41 PM (EDT)
A.M. Best Affirms Ratings of Zurich American Life Insurance Company and Farmers New World Life Insurance Company
Oldwick //BestWire// - A.M. Best has affirmed the financial strength rating (FSR) of A (Excellent) and the issuer credit rating (ICR) of “a” for Zurich American Life Insurance Company (ZALICO) (Schaumburg, IL) and affirmed the FSR of A (Excellent) and the ICR of “a+” of Farmers New World Life Insurance Company (FNWL) (Mercer Island, WA). These companies form the core U.S. life entities within the Zurich Insurance Group Global Life North America (ZIG GLNA) region. Concurrently, A.M. Best has affirmed the FSR of A- (Excellent) and the ICR of “a-” of Universal Underwriters Life Insurance Company (UULIC) (Overland Park, KS). The outlook for all ratings is stable.
The ratings for ZALICO reflect its growing strategic importance to the ZIG GLNA segment in offering life and annuity products to the affluent private placement market and global employee benefits market. The ratings recognize strong top line revenue growth and profit emergence at the consolidated group level from new business margins. The ratings also reflect the high credit quality of ZALICO’s investment portfolio which contributes to favorable risk-adjusted capitalization. Reinsurance is used extensively with affiliated reinsurers such as Zurich Insurance Company (ZIC) to promote capital efficiency in conjunction with centralized enterprise risk management practices. Partially offsetting rating factors include operating losses from new business strain and capitalization ratios that are qualitatively enhanced by the aforementioned use of affiliated reinsurance.
While ZALICO has made strides in increasing its market relevance, particularly within indexed universal life, the affluent and high net worth market remain highly competitive.
The ratings for FNWL reflect an overall level of contribution to ZIG GLNA in terms of premiums and new business margins given its operating profile that is material to ZIG GLNA. Risk-adjusted capitalization remains adequate to support insurance, investment and business risks and is enhanced by utilization of affiliated reinsurance with ZIC. The overall credit quality of FNLW’s investment portfolio remains sound despite higher allocations to less liquid asset classes, including private placements and commercial mortgages to improve portfolio yields. Partially offsetting rating factors include positive, albeit lower statutory operating earnings trends, and ongoing spread compression given high interest rate sensitivity associated with high minimum guaranteed crediting rates. Additionally, FNWL faces ongoing challenges in growing its distribution channel while improving persistency, particularly within life insurance.
The ratings for UULIC reflect its strong risk-adjusted capitalization, positive operating trends and overall good credit quality of invested assets. Partially offsetting factors include lack of top-line growth given its run off business profile.
This press release relates to rating(s) that have been published on A.M. 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 visit A.M. Best’s Ratings & Criteria Center.
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