AM Best Removes From Under Review With Negative Implications and Affirms Credit Ratings of Homesteaders Life Company
AM Best has removed from under review with negative implications and affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of Homesteaders Life Company (Homesteaders) (West Des Moines, IA). The outlook assigned to these Credit Ratings (ratings) is stable.
The ratings reflect Homesteaders’ balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
The rating affirmations with stable outlooks reflect the successful conversion of surplus notes and preferred equity held by Sammons Financial Group to common equity. Prior to the conversion, Homesteaders had a significant level of financial leverage while facing execution risk regarding the conversion of $40 million in surplus notes and $150 million in preferred equity. Execution risk also was present as Homesteaders reorganized to a mutual holding company structure. With the conversion and reorganization complete, the quality of capital has improved due to the elimination of financial leverage from the capital structure.
These actions were taken as Homesteaders invested $250 million in Park Lawn Corporation, a strategic investment that reinforces the company’s distribution and position in the pre-need market. Park Lawn Corporation, which owns and manages over 280 funeral home and cemetery properties, helps insulate Homesteaders from the long-term trend of funeral home consolidation.
A potential risk is the continued investment in affiliates supporting distribution and related insurtech initiatives, which while strategic for Homesteaders and its funeral home customers, requires near-term funding from the insurance operations and presents risk of capital strain if not managed appropriately.
This press release relates to Credit Ratings that have been published on AM 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.
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