OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has revised the issuer credit rating (ICR) outlook to positive from stable and affirmed the financial strength rating of B++ (Good) and the ICR of “bbb” of Great Western Insurance Company (Great Western) (Ogden, UT). The outlook for the FSR remains stable.
The revised ICR outlook reflects favorable operating and premium trends due to growth in its primary pre-need business segment, along with asset growth and expansion of investment margins within its recently established group annuity funding agreement (GAFA) segment, which acts as an investment vehicle for high deductible savings accounts. These trends have contributed to favorable growth in risk-based capital as measured Best’s Capital Adequacy Ratio (BCAR). The ratings also acknowledge synergies between Great Western’s preneed segment and its ultimate parent’s funeral home business with an experienced management team that has a deep understanding of the funeral and insurance market segment. These trends, coupled with recent geographic expansion, have contributed to significant premium growth over the past several years.
Partially offsetting factors include higher levels of investment risk in the investment portfolio and a high percentage of mortgage loans, which are concentrated in the funeral industry, along with a modest, though expanding business profile. In addition, A.M. Best notes that experience with the GAFA segment is still limited and needs to be seasoned over time given the potential for credit, liquidity and asset-liability matching (ALM) risks. However, A.M. Best notes that liquidity risk and ALM risk are partially mitigated by strong liquidity ratios, access to additional liquidity resources and limitations on the amount of funds that can be withdrawn in any one year along with surrender charge protection.
Key factors that could lead toward a positive rating action include continued profitable premium and earnings trends leading to an increase in risk-adjusted capital. Key factors that could lead to a negative rating action include negative premium and earnings trends that lead to a material decline in risk-adjusted capital. A negative rating action could also be taken if A.M. Best believes excessive credit risk or liquidity risk is taken in spread-based business segments that could lead toward a material decline in risk-adjusted capital.
This press release relates to rating(s) that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page.
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