A.M. Best Downgrades Forethought Life Insurance Co. Rating

Strategic Insights -

A.M. Best Co. has downgraded the financial strength rating of Forethought Life Insurance Co. to A- (Excellent) from A (Excellent) due to the company's continued low statutory operating earnings, anticipated loss at year-end 2006, and margin compression resulting from low interest rates. The rating downgrade also reflects the company's growing level of intangible assets and high financial leverage at its ultimate parent company, Forethought Financial Group, Inc. Despite its strong position in the pre-need market, Forethought Life Insurance Co. faces significant challenges as it diversifies into the highly competitive and interest-sensitive indexed annuity marketplace.

Key Takeaways:

  • A.M. Best Co. has downgraded the financial strength rating of Forethought Life Insurance Co. to A- (Excellent) from A (Excellent).
  • The rating downgrade reflects Forethought Life Insurance Co.'s continued low statutory operating earnings, anticipated loss at year-end 2006, and margin compression due to low interest rates.
  • The company's growing level of intangible assets and high financial leverage at its ultimate parent company, Forethought Financial Group, Inc., are also contributing factors to the rating downgrade.
  • Forethought Life Insurance Co.'s leading position in the pre-need market, strong technological platform, and successful distribution strategy continue to be recognized by A.M. Best.
  • Forethought Life Assurance Co.'s rating has been affirmed at A- (Excellent) due to its continued profitable business, strong persistency, and predictable mortality exhibited by the block of business reinsured from Forethought Life Insurance Co. and Arkansas National Life Insurance Co.
  • The rating of Arkansas National Life Insurance Co. has also been affirmed at B++ (Very Good) due to its strong capital position, single state pre-need marketing presence, and ancillary status to Forethought Life Insurance Co.

Statistics:

  • Forethought Life Insurance Co.'s FSR has been downgraded to A- (Excellent) from A (Excellent).
  • The outlook for this rating has been revised to stable from negative.
  • The FSR of Forethought Life Assurance Co. has been affirmed at A- (Excellent).
  • The FSR of Arkansas National Life Insurance Co. has been affirmed at B++ (Very Good).

Sources:

  • A.M. Best Co. press release, December 13, 2006, provided by COMTEX.
  • A.M. Best Co. website, http://www.ambest.com/ratings.
  • Copyright (C) 2006 by A.M. Best Company, Inc.