AM Best Revises Outlooks to Negative for Illinois Mutual Life Insurance Company

OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” of Illinois Mutual Life Insurance Company (Illinois Mutual) (Peoria, IL).

The Credit Ratings (ratings) reflect Illinois Mutual’s balance sheet strength, which AM Best categorizes as strongest, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.

The revision of the outlooks to negative reflects the challenges the firm has experienced from an earnings and premium growth perspective. Premium growth for the ordinary life insurance and disability income lines of business have been flat to negative for a number of years. Earnings, which had been relatively stable prior to 2019, have declined, and the company is in a net operating loss position through the first half of 2020. AM Best notes that these challenges are likely to be exacerbated in the present and near future as the result of the COVID-19 pandemic. AM Best will monitor the company’s operating performance in order to resolve the negative rating outlooks over the coming rating cycles.

The ratings continue to reflect the fact that Illinois Mutual maintains the strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). The company’s balance sheet also benefits from a relatively conservative investment portfolio, strong liquidity and the absence of any financial leverage. AM Best also notes that the core ordinary life and disability income product lines do not expose the company to significant levels of product risk. Offsetting rating factors include the fact that Illinois Mutual does not maintain significant market positions in either of its two core product lines, and has been solely dependent upon the earnings of its disability income line of late, as the ordinary life line has not been generating operating earnings. Furthermore, its run-off block of individual annuity business has been exhibiting signs of spread compression, and is no longer contributing to earnings.

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