OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has removed from under review with developing implications and upgraded the Financial Strength Rating to A- (Excellent) from B+ (Good) and the Long-Term Issuer Credit Rating to “a-” from “bbb-” of Merit Life Insurance Co. (Merit) (Austin, TX). The outlook assigned to these ratings is stable.
The ratings reflect Merit’s balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.
The company’s balance sheet strength assessment is anchored by its Best’s Capital Adequacy Ratio, which is considered to be at the strongest level. Merit’s flagship Contingent Deferred Annuity (CDA) product guarantees individuals a stream of income (i.e., 5% of the greater of the account value on the issue or exercise date) for life if the value of the purchaser’s account is reduced to zero during their lifetime. Each annuitant’s assets are to be managed by their fiduciary investment manager and will have predetermined investment parameters created by the investment management firm and agreed to by Merit. The company’s general account investment portfolio is expected to be well-diversified with a favorable level of liquidity. Brickell Insurance Holdings LLC (Brickell) acquired Merit on Dec. 31, 2019. 777 Partners, one of Brickell’s primary investors, is committed to supporting Merit’s risk-adjusted capitalization and will be making additional capital contributions as necessary to support growth.
The company’s operating performance assessment is based solely on projections provided by company management and include assumptions around expense efficiency and the generation of specific levels of fee income. AM Best notes that prospective earnings will be derived primarily from fees earned on protected assets and will be subject to equity market fluctuations. The company continues to file for state approvals on the CDA product, but has not yet commenced sales. Due to its limited product offerings and distribution channels its business profile is considered to be limited at this time.
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