|[October 17, 2013]
A.M. Best Upgrades the Issuer Credit Rating of Illinois Mutual Life Insurance Company
OLDWICK, N.J. --(Business Wire)--
A.M. Best Co. has upgraded the issuer credit rating to "bbb+"
from "bbb" and affirmed the financial strength rating of B++ (Good) of Illinois
Mutual Life Insurance Company (Illinois Mutual) (Peoria, IL). The
outlook for both ratings is stable.
The rating actions reflect Illinois Mutual's sound and improving
risk-adjusted capitalization driven by increasing levels of surplus and
the continuing benefits derived from its asset de-risking strategies
implemented several years ago in conjunction with its outside asset
manager. The rating actions also recognize Illinois Mutual's
solid-albeit fluctuating-overall net operating performance derived
primarily from its core disability income segment, which has experienced
favorable morbidity trends. The company's closed block of fixed
annuities also has contributed to earnings due to favorable persistency
and active spread management. Illinois Mutual's profitability has been
further enhanced by management's focus on operational efficiencies.
Additionally, the ratings reflect Illinois Mutual's somewhat diverse
business profile, marketing both its core individual disability income
and traditional forms of ordinary life products primarily to the middle
income market through multiple distributional channels. In 2010, the
company voluntarily ceased writing new individual annuity business;
however, it continues to administer its existing policies. Illinois
Mutual has achieved new sales growth in both its core product segments;
although, AM. Best notes that in recent years the company's sales have
been dampened somewhat by the general conditions of the economy and
restructuring strategies within its distribution channels. More
recently, the organization has implemented several new marketing
strategies, recruited additional distribution and began a multi-year
technology enhancement project to support its business needs.
As a mutual life insurance company, Illinois Mutual is limited in its
access to capital and relies heavily on retained earnings to increase
surplus and fund its growth initiatives. A.M. Best believes the company
may be challenged to sustain and improve its earnings as the combination
of expense strains associated with anticipated new business growth, the
continuing challenges of the persistent low interest rate environment
(especially on the company's interest-sensitive liabilities and
investments), and costs related to technology enhancement strategies.
Moreover, the impact of recently adopted statutory accounting practices
related to pensions and other post-retirement benefits could dampen
surplus growth. Illinois Mutual also faces the challenges of
disintermediation risk within its fixed annuity segment in a rising
interest rate environment.
Key rating factors that could lead to further positive rating actions
for Illinois Mutual include steady growth in capital, net operating
performance that exceeds A.M. Best's expectations and meaningful
top-line growth in its core ordinary life segment. Key rating factors
that could lead to negative rating actions include a significant and
sustained decline in risk-adjusted capitalization, net operating
performance that does not meet A.M. Best's expectations or a material
shift in its business profile skewed more heavily toward less
creditworthy lines of business.
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.
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 © 2013 by A.M. Best Company, Inc. ALL RIGHTS
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