AM Best Revises Outlooks to Stable for American Fidelity Life Insurance Company

OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has revised the outlooks to stable from negative and affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb” (Good) of American Fidelity Life Insurance Company (AMFI) (Pensacola, FL).

The Credit Ratings (ratings) reflect AMFI’s balance sheet strength, which AM Best assesses as very strong, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management (ERM).

The revised outlooks to stable represent AMFI’s improvement in its ERM and relatively stable operating performance trends.

AMFI’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), is assessed as strongest. However, AM Best notes that modest capital growth along with some downward credit migration has impacted the risk-based capital ratio. Liquidity capability is strong, with high overall liquidity metrics. AMFI’s bond portfolio is comprised of nearly all corporates, which is very liquid. In addition, this portfolio has laddered maturities, which provides ample liquidity to meet unexpected cash needs. Premium trends have been declining historically, but have shown some reversal of trends in 2020. Earnings have been generally positive and stable, with no operating losses over the past several years. Also, despite low interest rates, premium spreads on interest-sensitive products increased modestly in 2020. AMFI is niched in offering active duty soldiers products to build up savings and cash values, which they can use in the future.

Partially mitigating factors include some sector concentration in AMFI’s bond portfolio, a trend of increasing NAIC-2 bond allocations to over two-thirds of bonds, and concentration of mortgages in the Pensacola, FL area. Statutory return ratios are low compared with its peers and the life industry average.

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AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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