A.M. Best has affirmed the financial strength rating of A+ (Superior) and the long-term issuer credit ratings of “aa-” of Primerica Life Insurance Company and its affiliates National Benefit Life Insurance Company and Primerica Life Insurance Company of Canada.
In addition, A.M. Best has affirmed the long-term issuer credit rating of “a-” of Primerica, headquartered in Duluth, which is the holding company for the group’s insurance and non-insurance operating companies.
The ratings reflect Primerica Life’s balance sheet strength, which A.M. Best categorises as very strong, as well as its very strong operating performance, favourable business profile and appropriate enterprise risk management.
A.M. Best explained that Primerica Life’s ratings recognise the group’s continued risk-adjusted capitalisation assessed at the strongest level, as measured by Best’s Capital Adequacy Ratio, along with the quality of its investments and favourable reserve profile, although allocation to NAIC class two bonds is higher than the industry average.
The rating firm suggested that risk-adjusted capitalisation ratios reflect a heavy reliance on captive reinsurance solutions to fund its Regulation XXX reserves associated with term life insurance, which gradually will moderate as new business is issued under principles-based reserving practices.
The ratings also reflect strong liquidity, as well as solid financial leverage and interest coverage ratios that are within guidelines for these ratings.
According to A.M. Best, the quality of capital for an insurance operating company that has ceded XXX or AXXX reserves to a domestic or offshore captive is not as strong as for an operating company with similar risk-adjusted capital ratios that self-funds these reserves.
The rating company said: “The statutory capital growth of the operating insurance companies likely will be constrained by dividends to its ultimate parent, Primerica, which have been utilised to support higher levels of share repurchase.”
