OLDWICK, N.J. -- (Business Wire)
A.M. Best Co. has affirmed the financial strength rating (FSR) of
A (Excellent) and issuer credit rating (ICR) of “a” of Kansas CityLife Insurance Company (Kansas City Life) [NASDAQ: KCLI].
Additionally, A.M. Best has affirmed the FSR of A- (Excellent) and ICR
of “a-” of Kansas City Life’s wholly owned subsidiary, Sunset Life
Insurance Company of America (Sunset Life). The outlook for the
above ratings is stable.
Concurrently, A.M. Best has revised the outlook to stable from positive
and affirmed the FSR of B++ (Good) and ICR of “bbb+” of Old American
Insurance Company (Old American), the group’s final expense life
insurance subsidiary. All companies are domiciled in Kansas City, MO.
The ratings of Kansas City Life reflect its solid risk-adjusted capital
position and favorable trends in statutory and GAAP operating
profitability that have been primarily driven by the company’s core
universal and traditional life insurance and fixed annuity lines of
business. In addition, the ratings consider the company’s diversified
product portfolio and multi-channel distribution platform. Kansas City
Life also benefits from earnings on its acquired blocks of business.
A.M. Best notes that acquisitions remain a significant part of the
company’s growth strategy, and it plans on purchasing other insurance
companies or blocks of ordinary life insurance on an opportunistic basis.
Partially offsetting these positive rating factors is Kansas City Life’s
general decline in capital and surplus over the past five years driven
by stockholder dividends, and more recently, a material increase in its
pension liability due to the low interest rate environment. However,
Kansas City Life realized a $15 million capital gain from the sale of
real estate in the early part of 2012, which resulted in a noticeable
increase to its capital and surplus. The company also has experienced
mixed trends of ordinary life premiums over the past five-year period,
which can be partially attributed to the sluggish economy and intense
competition in the life insurance market space. While Kansas City Life
has reported operating gains on both a statutory and GAAP basis in
recent periods, earnings have been negatively impacted by low interest
rates and a general decline in premiums due to the run-off of its closed
blocks of business and a general decline in life insurance sales.
The revised outlook for Old American recognizes the decline in its
absolute and risk-adjusted capital position in recent periods due to
modest stockholder dividends and a change in the accounting treatment of
its deferred tax asset. While the company has demonstrated favorable
premium growth trends, recent operating results have been impacted by
heightened benefit claims and higher expenses associated with the
increased level of sales. A.M. Best notes that actual mortality results
have been within expectations, and the increase in benefit claims in the
early part of 2011 does not represent a trend. A.M. Best expects Old
American to remain profitable on both a statutory and GAAP accounting
basis over the near term.
A.M. Best believes Kansas City Life and Sunset Life are well positioned
for their current ratings. Positive rating actions may occur for Old
American if there were a material increase in its absolute and
risk-adjusted capital position, along with favorable premium growth and
increased earnings. Key rating drivers that may lead to negative rating
actions include a deterioration in risk-adjusted capital, decline in
earnings or if life insurance sales were to fall short of A.M. Best’s
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.
Founded in 1899, A.M. Best Company is the world’s oldest and most
authoritative insurance rating and information source. For more
information, visit www.ambest.com.
Copyright © 2012 by A.M. Best Company, Inc.ALL RIGHTS
A.M. Best Co.
(908) 439-2200, ext. 5133
Assistant Vice President
Senior Manager, Public Relations
439-2200, ext. 5378
Assistant Vice President, Public Relations
439-2200, ext. 5644
Source: A.M. Best Co.
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