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Global Credit Research - 24 Jun 2010
Approximately $125 million of debt affected.
New York, June 24, 2010 -- Moody's Investors Service has affirmed the Baa3 senior debt rating of
Americo Life, Inc. (Americo) and the A3 insurance financial
strength (IFS) rating of its operating subsidiary, Americo Financial
Life and Annuity Insurance Company (Americo Financial). The outlook
for the companies was changed to stable from negative. Americo
Financial is a wholly-owned subsidiary of Americo, and Americo,
in turn, is a wholly-owned subsidiary of privately-held
Financial Holding Corporation (unrated).
Moody's stated that the affirmation of Americo's ratings and the
change in outlook to stable were driven primarily by the company's
improvement in regulatory capital, as well as an expectation of
improved operating earnings and more modest investment losses going forward.
According to Moody's Analyst, Shachar Gonen, "Americo's
prudent management actions, including reducing sales volumes,
utilizing reinsurance to manage new business strain, and cost reductions
helped the company manage through the financial downturn with minimal
impact on its capital adequacy and financial flexibility. The stable
outlook largely reflects expectations for continued stable or improving
The rating agency noted that the group's year-end 2009 capital
position was very strong relative to the company's ratings,
with an NAIC RBC ratio of 419%. The RBC ratio benefited
from a $25 million capital contribution by the parent company and
regulatory changes that helped many other life companies. Although
the company's current capital level is strong, Moody's
expects a material portion of this cushion would be eroded under a severe
downside stress scenario.
Moodys' added that Americo's credit profile benefits from
a successful niche marketing strategy and a sizeable block of profitable
life insurance policies. However, the company's modest
business profile based on a narrow product focus and a concentration in
equity indexed annuities, which could be disrupted by pending regulatory
changes, constrains potential upward ratings pressure.
According to the rating agency, an upgrade of Americo's ratings
could occur if: 1) 2010 pre-tax statutory impairments and
non-affiliated equity holding declines < $30 million;
2) Average return on capital >8%; 3) Maintenance of average
earnings coverage of 6x or better; 4) holding company cashflow coverage
consistently > 4x.
Conversely, a downgrade of Americo's ratings could occur if:
1) 2010 Pre-tax statutory impairments and non-affiliated
equity holding declines > $30 million; 2) consolidated
company action level NAIC RBC ratio < 300%; 3) 2010 statutory
net gains from operations < $40 million.
The following ratings were affirmed with a stable outlook:
Americo Life Inc. -- senior unsecured debt at Baa3;
Americo Financial Life and Annuity Insurance Company --
insurance financial strength rating at A3.
The last rating action on Americo and its operating companies was on June
23, 2009 when Moody's affirmed the ratings of Americo Life Inc.
(senior unsecured debt at Baa3), Americo Financial Life and Annuity
Insurance Company (A3 insurance financial strength rating) and changed
the outlook to negative from stable.
Americo and Americo Financial are based in Kansas City, Missouri.
As of March 31, 2010, Americo Financial reported total statutory
assets of approximately $3.6 billion and capital of about
The principal methodology used in rating Americo was Moody's Global Rating
Methodology for Life Insurers, which can be found at www.moodys.com
in the Rating Methodologies sub-directory under the Research &
Ratings tab. Other methodologies and factors that may have been
considered in the process of rating this issuer can also be found in the
Rating Methodologies sub-directory on Moody's website.
Moody's insurance financial strength ratings are opinions of the ability
of insurance companies to punctually pay senior policyholder claims and
For more information please visit Moody's website at www.moodys.com/insurance.
Financial Institutions Group
Moody's Investors Service
Financial Institutions Group
Moody's Investors Service
Moody's affirms Americo (Baa3 sr debt); outlook to stable
No Related Data.
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