A.M. Best Affirms Ratings of Forethought Financial Group, Inc. and Forethought Life Insurance Company
January 9, 2014 by Best's News Service
OLDWICK, N.J. – A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) and issuer credit rating (ICR) of “a-” of Forethought Life Insurance Company (FLIC) (Indianapolis, IN). In addition, A.M. Best has affirmed the ICR of “bbb-” and the debt rating of “bbb-” on $150 million 8.625% senior unsecured notes, due 2021 of FLIC’s parent, Forethought Financial Group, Inc. (FFG) (headquartered in Houston, TX). The outlook for all ratings is stable.
The rating affirmations follow Global Atlantic Financial Group’s (Global Atlantic) completed acquisition of FLIC, effective January 2, 2014. FLIC will benefit from Global Atlantic’s strong capital base and also will enhance FFG’s debt service capabilities given the ability to access additional resources at the new parent. The rating affirmations also recognize FLIC’s strong stand-alone risk-adjusted capitalization, consistently positive statutory and GAAP earnings, its growing presence in the senior market through its niche pre-need life insurance and retirement based fixed indexed annuities and new variable annuity product offering. While FLIC has been increasing its focus on annuity growth to increase earnings, its in-force pre-need business earnings remains very stable and is a good source of earnings diversification for Global Atlantic. Additionally, A.M. Best notes that FFG’s financial leverage and coverage ratios are within A.M. Best’s guidelines for its current ratings.
Partially offsetting these positive rating factors are the challenges of the current historically low interest rate environment, slower new business growth from FLIC’s niche pre-need life insurance segment and the dependency on its annuity business for growth going forward. A.M. Best also will monitor Global Atlantic’s ability to fully integrate FLIC into its business platform and strategies. Despite these challenges, A.M. Best notes that FLIC remains a formidable player in the pre-need life market and brings a diversified block of in-force life and annuity business as well as increased distribution reach to Global Atlantic.
While A.M. Best believes FLIC remains well positioned at its current rating level over the near term, a key factor that could result in positive rating actions includes upward rating movement for Global Atlantic. Negative rating pressures could occur if FLIC’s risk-adjusted capitalization and/or operating performance declines or does not meet A.M. Best’s expectations over a sustained period. Other factors that could lead to negative rating actions include the ultimate parent’s inability to successfully integrate new business acquired, failure to provide financial support if needed and its inability to maintain ratings at the current level.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at http://www.ambest.com/ratings/methodology. BN-NJ-01-08-2014 1519 ET #
