OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “a+” of Farm Bureau Life Insurance Company (FBL). Concurrently, AM Best has affirmed the Long-Term ICR of “bbb+” of FBL Financial Group Inc. [NYSE:FFG], the holding company of FBL. The outlook of these Credit Ratings (ratings) is stable. Both companies are domiciled in West Des Moines, IA.
The ratings reflect FBL’s balance sheet strength, which AM Best categorizes as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management.
FBL’s ratings also reflect FBL’s strong risk-adjusted capitalization ratios that are at the strongest level currently, as measured by Best’s Capital Adequacy Ratio (BCAR), its good liquidity profile and its above-industry-average profitability metrics with very low volatility of earnings. FBL maintains an investment portfolio of good overall quality, although its commercial mortgage loans to capital ratio continues to increase and is above industry averages. The quality of capital is good given the limited use of reinsurance and no utilization of captives. FBL also benefits from good penetration of life/annuity sales within its multiline exclusive agent distribution system, with strong cross-sell rates that are consistently very favorable when benchmarked against the industry. Additionally, financial and operating leverage at the holding company are modest with strong interest coverage ratios.
Partially offsetting rating factors include continued spread compression, as FBL has a sizable percentage of annuity and ordinary life business in force at guaranteed minimum crediting rates, although overall spreads have remained adequate due to solid investment yields. Additionally, a high percentage of the annuity liabilities lack surrender charge protection, which exposes the company to some disintermediation risk if there is a rapid increase in the interest rate environment. Finally, while FBL has strong branding and distribution channels, its business profile is regional with a concentration in the Midwest and Western rural regions of the United States.
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