A.M. Best Affirms Credit Ratings of Kansas City Life Insurance Company and Its Subsidiaries
September 15, 2017 by Best's News Service
FOR IMMEDIATE RELEASE
OLDWICK – SEPTEMBER 15, 2017
A.M. Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “a” of Kansas City Life Insurance Company (Kansas City Life). Concurrently, A.M. Best has affirmed the FSR of A- (Excellent) and the Long-Term ICRs of “a-” of Kansas City Life’s wholly owned subsidiary, Sunset Life Insurance Company of America and its final expense life insurance subsidiary, Old American Insurance Company. The outlook of these Credit Ratings (ratings) is stable. All companies are domiciled in Kansas City, MO. These companies are collectively referred to as Kansas City Life Group.
The ratings of Kansas City Life reflect its adequate risk-adjusted capital position and strong balance sheet with no long-term debt or operating leverage, as well as Kansas City Life’s financial flexibility and liquidity, which remain more than adequate to support the company’s risk profile. Offsetting rating factors include the company’s lack of consistent growth in ordinary life premium, above-average exposure to interest-sensitive liabilities and material exposure to real estate, particularly commercial mortgage loans.
Despite the inconsistent statutory earnings results, Kansas City Life’s ability to deliver consistently profitable operating performance, together with a reduction in the level of stockholder dividends as a result of the reverse/forward stock split in 2015, has enabled the company to maintain an adequate level of risk-adjusted capitalization. Kansas City Life’s balance sheet remains strong, due in part to the benefits from the liability-driven management of its products, which primarily consists of fixed and variable annuities, universal life insurance, and term life insurance. Kansas City Life’s investment portfolio is composed mainly of high quality (NAIC class 1/2), publicly traded, investment-grade fixed income securities. A.M. Best notes that approximately 27% of invested assets are allocated to investments with real estate exposure, which exposes the group to some concentration risk, but A.M. Best believes this is partially offset by the group’s strong sector and geographical diversification in the segment.
A.M. Best also is concerned about Kansas City Life’s trend of declining operating profits for the last three years, due in part to the low-yield environment and historically flat sales. In addition, a large portion of reserves are subject to high minimum interest rate guarantees, which could result in spread compression in future periods if interest rates remain at current levels.
A negative rating action could occur if risk-adjusted capital were to decline, or if operating trends decline further. In addition, a negative rating action could be taken if Kansas City Life Group were to significantly increase the risk profile of their investment portfolio, leading A.M. Best to view the balance sheet as less secure.
This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media – Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.
A.M. Best is the world’s oldest and most authoritative insurance rating and information source.
European Union Disclosures
A.M. Best – Europe Rating Services Limited (AMBERS), a subsidiary of A.M. Best Rating Services, Inc., is an External Credit Assessment Institution (ECAI) in the European Union (EU). Therefore, credit ratings issued and endorsed by AMBERS may be used for regulatory purposes in the EU as per Directive 2006/48/EC.
Australian Disclosures
A.M. Best Asia-Pacific Limited (AMBAP), Australian Registered Body Number (ARBN No.150375287), is a limited liability company incorporated and domiciled in Hong Kong. AMBAP is a wholesale Australian Financial Services (AFS) Licence holder (AFS No. 411055) under the Corporations Act 2001. Credit ratings emanating from AMBAP are not intended for and must not be distributed to any person in Australia other than a wholesale client as defined in Chapter 7 of the Corporations Act. AMBAP does not authorize its Credit Ratings to be disseminated by a third-party in a manner that could reasonably be regarded as being intended to influence a retail client in making a decision in relation to a particular product or class of financial product. AMBAP Credit Ratings are intended for wholesale clients only, as defined.
Credit Ratings determined and disseminated by AMBAP are the opinion of AMBAP only and not any specific credit analyst. AMBAP Credit Ratings are statements of opinion and not statements of fact. They are not recommendations to buy, hold or sell any securities or any other form of financial product, including insurance policies and are not a recommendation to be used to make investment /purchasing decisions.
Important Notice: A.M. Best’s Credit Ratings are independent and objective opinions, not statements of fact. A.M. Best is not an Investment Advisor, does not offer investment advice of any kind, nor does the company or its Ratings Analysts offer any form of structuring or financial advice. A.M. Best’s credit opinions are not recommendations to buy, sell or hold securities, or to make any other investment decisions. For additional information regarding the use and limitations of credit rating opinions, as well as the rating process, information requirements and other rating related terms and definitions, please view Understanding Best’s Credit Ratings.
A.M. Best receives compensation for rating related services provided to organizations that it rates. A.M. Best does not offer consulting or advisory services.
