OLDWICK, NJ–(BUSINESS WIRE)–AM Best affirmed the financial strength rating of A- (Excellent) and the issuer’s long-term credit rating of “a-” (Excellent) from Fidelity Life Association, A Legal Reserve Life Insurance Company (Fidelity Life) (Chicago , HE). FLA is a wholly owned subsidiary of Vericity, Inc. (Vericity).
The ratings reflect Fidelity Life’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate management of business risks.
Fidelity Life’s risk-adjusted capitalization is rated at the highest level, as measured by Best’s Capital Adequacy Ratio (BCAR), and supports the insurance, business and investment risks of the society. The company’s liquidity capacity is good, supported by strong liquidity ratios, and its overall credit quality of invested assets is also good. AM Best notes that Fidelity Life’s allocations to commercial loans are high compared to its peers, but this portfolio has performed well. The negative outlook reflects AM Best’s view that Fidelity Life’s operating performance will continue to be challenged in the short to medium term with new business growth, new business pressure and capital expenditures. in its information technology infrastructure. Use of reinsurance is high as the Company prefers to use reinsurance rather than reserve funding as part of its capital structure.
The company’s premium growth has been robust, with five-year compound annual growth rates for direct premiums written well above the life insurance industry average. However, the majority of net premiums written by Fidelity Life are related to ordinary life insurance products and have relatively higher lapse rates than the life insurance industry average. More than a quarter of Fidelity Life’s total liabilities are interest rate sensitive, with the majority having no surrender charges and higher guarantees.
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