A.M. Best Downgrades and Removes From Under Review the Ratings of Lincoln Benefit Life Company
July 9, 2014 by Best's News Service
Oldwick – A.M. Best has downgraded the financial strength rating to A- (Excellent) from A+ (Superior) and the issuer credit rating to “a-” from “aa-” of Lincoln Benefit Life Company (LBL) (Lincoln, NE). Both ratings have been removed from under review with negative implications and assigned a stable outlook.
The removal of the under review status reflects the recent acquisition of LBL by Resolution Life, Inc. (Resolution Life) from Allstate Life Insurance Company (Allstate) on April 1, 2014. Resolution Life is a non-licensed insurance subsidiary of Resolution Life Holdings, Inc. (both incorporated in Delaware), and Resolution Life considers LBL a core operating subsidiary and plans to continue to operate the company as a run-off block of business.
The rating downgrades of LBL are reflective of a run-off company that is expected to maintain a strong capitalization profile, both on a risk-adjusted basis, as well as within Best’s Capital Adequacy Ratio (BCAR). The company will manage the business based on a run-off business model utilizing a variable cost structure, which relies on outside third party administrators. This variable cost structure should allow the company to operate efficiently as the book of business matures. LBL has committed to limit the risk contained in the asset portfolio of its balance sheet, and while not focusing on higher yielding assets, the company’s strategy is to position itself as a lower asset risk entity.
While LBL has committed to creating a very stable and low risk balance sheet, it is currently in the early stages of converting the management of its operations into a new business model, as it will still utilize Allstate through servicing and operational support for up to two years, on a sliding scale. A.M. Best anticipates that LBL will be able to complete this transition, although it will take some time for the process to be fully realized.
Positive rating actions are unlikely in the near term, as LBL has not yet fully transitioned into the new business model. Negative rating actions could occur if there are negative changes in LBL’s capitalization and/or operating performance.
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 www.ambest.com/ratings/methodology.
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