OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Ratings of “a-” of Delaware Life Insurance Company (Wilmington, DE) and Delaware Life Insurance Company of New York (New York, NY) (collectively referred to as Delaware Life). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Delaware Life’s strong level of risk-adjusted capitalization, generally positive operating earnings trends, improving business profile and the strides it has made over the past two years to become a writer of fixed indexed annuity products, expanding its distribution channels and managing its large acquired blocks of variable annuities, traditional fixed annuities and life insurance. The group’s business profile is improving, as it shifts from managing an acquired in-force block of variable annuities to marketing multi-year guaranteed annuities and fixed indexed annuity products. The ratings recognize an effective enterprise risk management program and an internal capital support agreement by the company’s capital partners if risk-adjusted capitalization falls below certain prescribed levels.
These strengths are partially offset by elevated levels of investment risk relative to the industry through higher allocations of structured securities and schedule BA assets. While Delaware Life’s acquired variable annuity block is in runoff, it still maintains sensitivity to equity market declines and interest rate risk. Interest rate risk is bilateral in that low rates will contribute to spread compression while a rapid rise in interest rates could result in dis-intermediation risk. Equity and interest rate risk on its inforce block of variable annuities is mitigated partially by a hedging program that is generally effective, and interest rate risk on fixed annuities is monitored through its asset liability management program and cash flow testing practices. Additionally, there is some execution risk in carrying out its business plans, which may include potential expansion into other markets with lower levels of equity and interest rate risk.
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