When it comes to choosing a health insurance plan, nothing beats dealing with a real live advisor...
A.M. Best Co. has affirmed the financial strength rating (FSR) of A (Excellent) and issuer credit rating (ICR) of "a" of Kansas City Life Insurance Company.
Additionally, A.M. Best has affirmed the FSR of A- (Excellent) and ICR of "a-" of Kansas City Life's subsidiary, Sunset Life Insurance Company of America (Sunset Life). The outlook for the above ratings is stable.
Concurrently, A.M. Best has revised the outlook to stable from positive and affirmed the FSR of B++ (Good) and ICR of "bbb+" of Old American Insurance Company (Old American), the group's final expense life insurance subsidiary. All companies are domiciled in Kansas City, MO.
The ratings of Kansas City Life reflect its solid risk-adjusted capital position and favorable trends in statutory and GAAP operating profitability that have been primarily driven by the company's core universal and traditional life insurance and fixed annuity lines of business. In addition, the ratings consider the company's diversified product portfolio and multi-channel distribution platform. Kansas City Life also benefits from earnings on its acquired blocks of business. A.M. Best notes that acquisitions remain a significant part of the company's growth strategy, and it plans on purchasing other insurance companies or blocks of ordinary life insurance on an opportunistic basis.
Partially offsetting these positive rating factors is Kansas City Life's general decline in capital and surplus over the past five years driven by stockholder dividends, and more recently, a material increase in its pension liability due to the low interest rate environment. However, Kansas City Life realized a $15 million capital gain from the sale of real estate in the early part of 2012, which resulted in a noticeable increase to its capital and surplus. The company also has experienced mixed trends of ordinary life premiums over the past five-year period, which can be partially attributed to the sluggish economy and intense competition in the life insurance market space. While Kansas City Life has reported operating gains on both a statutory and GAAP basis in recent periods, earnings have been negatively impacted by low interest rates and a general decline in premiums due to the run-off of its closed blocks of business and a general decline in life insurance sales.
The revised outlook for Old American recognizes the decline in its absolute and risk-adjusted capital position in recent periods due to modest stockholder dividends and a change in the accounting treatment of its deferred tax asset. While the company has demonstrated favorable premium growth trends, recent operating results have been impacted by heightened benefit claims and higher expenses associated with the increased level of sales. A.M. Best notes that actual mortality results have been within expectations, and the increase in benefit claims in the early part of 2011 does not represent a trend. A.M. Best expects Old American to remain profitable on both a statutory and GAAP accounting basis over the near term.
A.M. Best believes Kansas City Life and Sunset Life are well positioned for their current ratings. Positive rating actions may occur for Old American if there were a material increase in its absolute and risk-adjusted capital position, along with favorable premium growth and increased earnings. Key rating drivers that may lead to negative rating actions include a deterioration in risk- adjusted capital, decline in earnings or if life insurance sales were to fall short of A.M. Best's expectations.
The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides an 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 ambest.com/ratings/methodology.
A.M. Best Company is an insurance rating and information source.
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