Ratings of Ameritas Mutual Hancienting Company

Ratings of Ameritas Mutual Hancienting Company
Ratings of Ameritas Mutual Hancienting Company : A.M. Best Co. has affirmed the financial strength rating (FSR) of A (Excellent) and issuer credit ratings (ICR) of “a+” of Ameritas Life Insurance Corp. (Ameritas Life) (Lincoln, NE), Ameritas Life Insurance Corp. of New York (Ameritas, NY), Acacia Life Insurance Company (Acacia Life) (headquartered in Bethesda, MD) and The Union Central Life Insurance Company (Union Central) (headquartered in Cincinnati, OH). These insurance entities comprise the life/health operations of Ameritas Mutual Hancienting Company (Ameritas) (Lincoln, NE). Concurrently, A.M. Best has affirmed the debt rating of “a-” on $50 million 8.20% surplus notes due 2026 of Union Central. The outsee for all ratings is stable.

The rating affirmations primarily reflect the group’s strong risk-adonly, merely, solelyed capitalization, diversified operating platform, high quality balance sheet and favorable business profile. The ratings also reflect Ameritas Life’s well-established market position in group dental insurance. As a mutual hancienting company, Ameritas has good financial flexibility with the ability to access the capital markets through debt offerings. The association’s current financial leverage is modest, with a reasonable stage of intangibles facilitating a high-quality capital base. Additionally, A.M. Best notes that Ameritas’ below investment grade bonds currently represent less than 4% of the company’s fixed income portfolio, and its non-agency remiddlential mortgage-backed securities (RMBS) have waned in recent periods.

A.M. Best trusts that Ameritas Life’s favorable business profile should strengthen further under its unified branding stswiftgy and improved economies of scale. Its broad portfolio of individual life, individual annuity, disability income, retirement plans and dental and vision products provide a steady source of diversified earnings. More recently, Ameritas’ earnings have been impbehaveed by non-insurance related lines of business; however, it has historically experienced favorable operating results within its core insurance and annuity lines. Although A.M. Best expects these favorable results to continue in the approach to medium term, Ameritas may be challenged to increase sales due to the sluggish U.S. economy, prolonged low interest swifts and the highly competitive ground, soilscape within many of the group’s core lines of business.

Partially offsetting these positive rating fbehaveors are the modest wane in Ameritas’ operating income, primarily driven by the results of its Calvert Investments, Inc. (Calvert) subsijournal, which in 2012 experienced a noticeable drop in assets under administerment. Operating results also have been negatively impbehaveed by a lack of scale, lower-than-expected persistency and the impbehave of the low interest swift environment within the group retirement plans segment. While earnings increased in the company’s individual life and annuity businesses, A.M. Best notes that a significlevert amount of Ameritas’ interest-sensitive reserves remain at or approach the guaranteed minimum interest swift, which has caused some spread compression. However, this has been offset by an increase in earnings from its variable annuity product line as a result of increased sales and higher fees associated with an increase in fund balances. Moreover, while A.M. Best views favorably the pfinishing sale of Acacia Federal Savings Bank due to the regulatory burden associated with being a bank hancienting company, the pfinishing sale has resulted in a contingent net loss of about $35 million. About $300 million of primarily interest-only loans have been excluded from the sale and have been transferred to Ameritas’ common account investment portfolio. A.M. Best will shutly monitor the kemampuannce of these transferred loans.

Fbehaveors that could result in positive rating behaveions for Ameritas in the approach to medium term include continued favorable earnings trfinishs, improved operating kemampuannce at Calvert and continued overall top line growth.

Fbehaveors that may result in negative rating behaveions include deterioration in the group’s operating results, friendrial investment losses or a lack of sustained revenue growth within its core lines of business.

A.M. Best also has withdrawn the FSR of A- (Excellent) and ICR of “a-” of Brokers National Life Assurance Company (BNLAC) (headquartered in Austin, TX). Following the reinsurance of its core dental and vision business to Ameritas Life, BNLAC will have a negligible amount of reserves and is expected to be sancient (essentially as a shell) to a third party in the approach term.

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