A.M. Best Upgrades and Removes Ratings of EquiTrust Life Insurance Company Life From Under Review [Professional Services Close – Up]

A.M. Best Co. said it has removed from under review with developing implications and upgraded the financial strength rating to B++ (Good) from B+ (Good) and issuer credit rating to "bbb+" from "bbb-"of EquiTrust Life Insurance Company (EquiTrust) (West Des Moines, IA).

In a release, the insurance ratings company said the outlook assigned to both ratings is stable. The company is ultimately owned by Guggenheim Capital (Guggenheim).

The rating actions reflect EquiTrust's new ownership by Guggenheim, good overall credit quality of its investment portfolio, recent trends of positive operating earnings and favorable level of risk-adjusted capitalization that is supportive of the company's ratings.

EquiTrust was purchased by Guggenheim on December 30, 2011. Under its new ownership, EquiTrust has been able to resume its active marketing of fixed indexed annuities while receiving financial support and investment expertise from Guggenheim. EquiTrust has recorded positive trends in operating income for the past three years, including the first half of 2012, partially due to positive interest spread margins and until recently, lower strain-related costs. The overall high credit quality of the company's investment portfolio, combined with its large unrealized gain position, supports EquiTrust's capitalization.

Partially offsetting these positive rating factors is EquiTrust's large exposure to interest-sensitive products, which may place it at risk of spread compression if the low interest rate environment persists, elevated exposure to structured investment products, commercial mortgages and below investment grade bonds relative to statutory capital and surplus and low rates of return.

Factors that could lead to positive rating actions for EquiTrust include increasing and sustained earnings trends, profitable premium and revenue diversification by reducing its high concentration in interest sensitive liabilities and a gradual reduction in exposure to structured securities.

Factors that could lead to negative rating actions include a weakening in the company's risk-adjusted capitalization, reported financial results not meeting A.M. Best's expectations or a loss of the strategic and financial support of Guggenheim.

More information:

www.ambest.com

((Comments on this story may be sent to [email protected]))