TMCNet: A.M. Best Upgrades Issuer Credit Rating of Farm Bureau Life Insurance Company

[May 10, 2017]

A.M. Best Upgrades Issuer Credit Rating of Farm Bureau Life Insurance Company

A.M. Best has upgraded the Long-Term Issuer Credit Rating (Long-Term ICR) to "a+" from "a" and affirmed the Financial Strength Rating (FSR) of A (Excellent) of Farm Bureau Life Insurance Company (FBL). The outlook of the Long-Term ICR has been revised to stable from positive, while the FSR outlook remains stable. Concurrently, A.M. Best has upgraded the Long-Term ICR to "bbb+" from "bbb" of FBL Financial Group Inc. [NYSE:FFG], the parent holding company of FBL, and revised the outlook to stable from positive. Both companies are domiciled in West Des Moines, IA.

The Long-Term ICR upgrade reflects FBL's strong risk-adjusted capitalization, positive earnings trends, strong operating returns and a capitalization profile that is viewed qualitatively as high. FBL has an investment portfolio of good overall credit quality with limited use of reinsurance and no utilization of captives. Overall capital trends remain favorable due to continued organic earnings growth and good penetration of life/annuity sales within its property/casualty distribution system with above-average cross-sell rates that consistently have been favorable, and higher four-year agent retention trends. Additionally, financial and operational leverage at the holding company is very modest with strong interest coverage ratios.

Partially offsetting Credit Rating(rating) factors include ongoing spread compression with a high percentage of annuity and universal life liabilities at guaranteed minimum crediting rates, although overall spreads remain strong due to an investment portfolio yield that is higher than the industry average. Additionally, a high percentage of annuity liabilities do not have surrender charge protection, which could result in disintermediation risk under a rapidly rising interest rate scenario, which A.M. Best views as unlikely in the near term. Finally, while FBL has good brand awareness, its business profile is concentrated primarily in the Midwest and Western geographic regions.

This press release relates to Credit Ratings that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best's Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best's Credit Ratings.

A.M. Best is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

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