The assigned ratings of GLAC reflect its core reinsurance segment position within Guggenheim’s diversified business platform, financial and investment support provided by Guggenheim, positive trends of premium growth, statutory operating earnings and more than adequate risk-adjusted capitalization.
GLAC operates in a niche position where it accepts mainly fixed and fixed indexed annuity reinsurance as well as the sales of life insurance to high net worth individuals. Since it began operations in 2008, GLAC has demonstrated continuing premium growth while generating positive operating results as a result of the improved spread margin on its reinsured fixed annuity book of business and fee-based income. GLAC’s more than adequate level of risk-adjusted capitalization is attributed to its high credit quality investment portfolio and the financial contributions from Guggenheim to support GLAC’s business growth.
Partially offsetting these positive rating factors is GLAC’s elevated exposure to structured securities within its fixed income portfolio, its large percentage of interest-sensitive fixed annuity liabilities, which may expose the company to spread compression due to the continuing low interest rate environment, and an elevated exposure to other invested assets that are comprised primarily of affiliated investments through Guggenheim.
Factors that could lead to positive rating actions for GLAC include increasing positive earnings trends, greater profitable premium and revenue diversification achieved by reducing the high concentration in interest sensitive liabilities and gradual reduction in exposure to structured securities.
Factors that could lead to downward rating actions include a weakening of the company’s risk-adjusted capitalization, reported financial results not meeting A.M. Best’s expectations or a loss of strategic and financial support of Guggenheim.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Key criteria utilized include: “Understanding BCAR for Life/Health Insurers”; “Rating New Company Formations”; and “Risk Management and the Rating Process for Insurance Companies.” Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
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