A.M. Best Affirms Ratings of Farm Bureau Life Insurance Company and FBL Financial Group Inc.
December 5, 2013 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 Farm Bureau
Life Insurance Company (FB Life). Concurrently, A.M. Best has affirmed
the ICR of “bbb-” of FBL Financial Group Inc. (FFG) [NYSE: FFG], the
parent of FB Life. The outlook for all ratings is positive. Both
companies are domiciled in West Des Moines, IA.
The rating affirmations for FB Life recognize its positive earnings in
all lines of business in recent years, despite spread compression in its
interest-sensitive products due to ongoing low interest rates,
increased life sales along with a concurrent moderation of fixed annuity
sales, continued market focus on its Farm Bureau membership and
sufficient risk-adjusted capitalization to support its ratings. FB Life
markets life and annuity products through an exclusive agency force in
14 Midwestern and Western states and has demonstrated good penetration
into its core Farm Bureau market.
Partially offsetting these positive rating factors are the large reduced
unrealized gain position in FB Life’s fixed income investment holdings
in 2013 as a result of rising interest rates; its exposure to spread
compression in its fixed annuity and universal life lines of business;
and exposure to disintermediation risk due to low surrender protection
in its fixed annuity blocks of business.
The rating affirmations for FFG reflect its improved financial leverage
due to the retirement of its $50 million intercompany note in 2013. The
only debt remaining at FFG is affiliated trust preferred notes. In
addition, there is $100 million available at the holding company.
Factors that could result in positive rating actions include favorable
trends in the organization’s operating earnings, continued positive
trends in ordinary life premium growth and management through changes in
the interest rate environment. Factors that could lead to negative
rating actions include large unrealized losses in the investment
portfolio, erosion of risk-adjusted capitalization due to other than
temporary impairments and operating losses, and flat to declining trends
in ordinary life premium growth.
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-12-04-2013 0936 ET #