The outlook for both ratings is stable.
The rating affirmations reflect Fidelity Life's strong risk- adjusted capitalization, profitable operation and high earnings retention.
Fidelity Life is adequately capitalized, as indicated by Best's Capital Adequacy Ratio (BCAR), which evaluates a company's risk- based capital. The company also has maintained a track record of consistent profitability. In addition, most of Fidelity Life's profits have been retained to support its business. From 2008 to 2012, total equity increased from
Although Fidelity Life's BCAR is projected to decline as a result of new business strain, management will closely monitor its new business growth to maintain an adequate buffer above the minimum solvency requirements.
Partially offsetting these positive rating factors is the impact of competitive pressures on Fidelity Life.
Competition remains intense in the independent adviser channel, which is the company's primary distribution channel. Competitive pressures may result in a higher lapse than expected and/or smaller premium increases than anticipated.
Fidelity Life's ratings could be upgraded and/or its outlook revised positively over the next few years if it can improve its mortality, morbidity, lapse and expense experience and if there are no material deviations from its projected solvency margin. Conversely, if the solvency margin falls significantly short of central projections, the outlook and/or ratings could be pressured.
The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of
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