A.M. Best Affirms Ratings of Fidelity Security Life Insurance Company and Its Subsidiary [Professional Services Close – Up]

A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) and issuer credit ratings of "a-" of Fidelity Security Life Insurance Company (FSL) (Kansas City, MO) and its recently acquired subsidiary, Fidelity Security Life Insurance Company of New York (FSLNY) (New York, NY), formerly known as Great American Life Insurance Company of New York.

The outlook for all ratings is stable.

The rating affirmations for FSL reflect its continued favorable net operating gains and capital growth trend, its prudent expense management and the diversification provided by its numerous strategic business units. Through its recent acquisition of FSLNY, FSL will now have full access to the New York market, where it intends to market its existing portfolio of products. The policy obligations and capitalization of FSLNY are explicitly supported by FSL.

FSL has consistently reported operating gains over a five-year period, which has been driven by favorable underwriting and net investment income, and the company has more than doubled its capital during the same period. Expense management has been a focus over the past few years as the company has worked to complete several technological upgrades and create additional efficiencies in its business process.

While A.M. Best believes the enacted Patient Protection and Affordable Care Act mandates will not have a material impact on FSL, its health insurance product lines may need adjustments to conform to ongoing regulatory changes over the next few years. The company's business strategy is reliant on its relationships with numerous distribution partners within the majority of its five strategic business units. A.M. Best remains concerned that several of the agreements have the potential to materially impact future operating results if one or more of the partnerships were to be discontinued. Additionally, A.M. Best believes that FSL will be challenged to maintain recent spreads on its annuity segment if the current low interest rate environment persists for an extended period of time.

A.M. Best believes that FSL is well positioned at its current rating level for the near to medium term. Factors that could lead to negative rating actions include operating performance and risk- adjusted capitalization falling markedly short of A.M. Best's expectations. This includes the impact that the poor macroeconomic environment may have on both companies' revenue, profitability or distribution partners.

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. Key criteria utilized include: "Risk Management and the Rating Process for Insurance Companies"; "Understanding BCAR for Life/Health Insurers"; "A.M. Best's Perspective on Operating Leverage"; "Rating Health Insurance Companies"; and "Rating Members of Insurance Groups." Best's Credit Rating Methodology can be found at ambest.com/ratings/ methodology.

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