OLDWICK, N.J.--(BUSINESS WIRE)--
A.M. Best Co. has downgraded the financial strength rating to B+
(Good) from B++ (Good) and issuer credit rating to “bbb-” from “bbb+” of Illinois
Mutual Life Insurance Company (Illinois Mutual) (Peoria, IL). The
outlook has been revised to negative from stable.
The rating actions reflect A.M. Best’s concerns over the large decline
in Illinois Mutual’s reported surplus in 2010, modest risk-adjusted
capital position, remaining level of risk within its investment
portfolio and limited financial flexibility.
Due primarily to impairments and realized losses in both its corporate
fixed income and structured securities portfolios, Illinois Mutual
recorded a 17% reduction in its surplus level through the first half of
2010. However, the majority of realized losses were the result of the
company’s active strategy to improve the quality of risk-adjusted
capitalization. This decline in surplus was beyond A.M. Best’s
expectations and represents a continuation in a pattern of declining
capital levels. Although Illinois Mutual has recognized impairments in
each of the last three years, A.M. Best notes that the company may be
subject to additional, yet limited, write-downs in its remaining
structured assets, further stressing its capital position. This concern
is reflected in the negative outlook.
Illinois Mutual’s exposure to commercial mortgage loans, although the
portfolio is currently performing well and while its outstanding balance
has reduced, represents an area of potential stress given the challenges
in the commercial mortgage lending arena. Impairments to date have been
Illinois Mutual’s ratings continue to recognize its consistently
positive net gains from its operations, diversified lines of business,
growing life insurance business and continuing profitable niche in the
disability insurance marketplace. Illinois Mutual has taken proactive
steps in reducing unit costs and managing the remaining risk within its
structured product portfolio.
The principal methodology used in determining these ratings is Best’s
Credit Rating Methodology -- Global Life and Non-Life Insurance Edition,
which provides a comprehensive explanation of A.M. Best’s rating process
and highlights the different rating criteria employed. Additional key
criteria utilized include: “Risk Management and the Rating Process for
Insurance Companies” and “Understanding BCAR for Life and Health
Insurers.” Methodologies can be found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is a global full-service credit
rating organization dedicated to serving the financial and health care
service industries, including insurance companies, banks, hospitals and
health care system providers. For more information, visit www.ambest.com.
A.M. Best CompanyEva Sverdlova, 908-439-2200, ext. 5733Senior
Financial Analyst[email protected]orRaj
Shah, 908-439-2200, ext. 5409Assistant Vice President[email protected]orRachelle
Morrow, 908-439-2200, ext. 5378Senior Manager, Public Relations[email protected]orJim
Peavy, 908-439-2200, ext. 5644Assistant Vice President, Public
Source: A.M. Best Company