A.M. Best Removes Ratings of Global Atlantic Financial Group’s Subsidiaries
From Under Review
OLDWICK, N.J. -- October 3, 2013
A.M. Best Co. has removed from under review with negative implications and
affirmed the financial strength rating (FSR) of A- (Excellent) and issuer
credit ratings (ICR) of “a-” of Commonwealth Annuity and Life Insurance
Company (Commonwealth) and its subsidiary, First Allmerica Financial Life
Insurance Company (FAFLIC) (both domiciled in Southborough, MA).
A.M. Best also has removed from under review with negative implications and
affirmed the FSR of A- (Excellent) and ICR of “a-” of Commonwealth Annuity and
Life Reinsurance Company Ltd. (Commonwealth Re) (Bermuda). The outlook
assigned to the above ratings is stable. These entities are ultimately owned
by Global Atlantic Financial Group (Global Atlantic) (headquartered in
The rating actions follow Global Atlantic’s fourth-quarter 2013 acquisition of
AVIVA plc’s (AVIVA) U.S. life insurance business from Athene Holding Ltd.
(Athene). The rating actions also reflect A.M. Best's view that the
acquisition will provide Global Atlantic with new sources of earnings
diversification, as this acquisition will enhance its product lines and
distribution channels. Challenges exist with respect to Global Atlantic’s
rebranding of AVIVA’s products, the heightened expenses associated with the
integration and execution risks. A.M. Best will continue to monitor the
effects of this transaction on Global Atlantic’s earnings, top line growth and
capital adequacy going forward.
The ratings also recognize the recent announcement that Global Atlantic has
entered into a definitive agreement to acquire Forethought Financial Group,
Inc. (FFGI) (Delaware) and its key subsidiary, Forethought Life Insurance
Company (Indianapolis, IN). Upon the completion of the transaction, FFGI will
become a wholly owned subsidiary of Global Atlantic. At that time, Global
Atlantic will acquire all products and designs, distribution, marketing,
intellectual capital and employed talent, as well as all in-force business of
FFGI. This transaction will provide additional product diversification to
Global Atlantic, including its pre-need insurance.
Offsetting rating factors include Global Atlantic’s recent loss of the Goldman
Sachs brand and its capital support as Global Atlantic will need to establish
new brand awareness and implement certain infrastructure and systems
capabilities as a stand-alone entity. Additional offsetting rating factors
include the group’s elevated, although declining, exposure to structured
securities within its fixed income portfolio and the challenges relating to
the continued low interest rate environment. Furthermore, Global Atlantic’s
business plan is fairly new and remains untested.
Concurrently, A.M. Best has assigned a FSR of A- (Excellent) and an ICR of
“a-” to Presidential Life Insurance Company – USA (PLIC-USA) (Des Moines, IA).
The outlook assigned to both ratings is stable.
The ratings reflect PLIC-USA’s role to acquire the AVIVA U.S. life business
(consisting of life policies written by Aviva Life and Annuity Company, a
subsidiary of AVIVA) primarily through reinsurance. PLIC-USA was acquired from
Athene as part of the completed AVIVA U.S. life transaction. The ratings also
recognize PLIC-USA’s focus on cash accumulation products, adequate risk-based
capital and leveraging of existing distribution relationships.
Offsetting rating factors include challenges associated with the future
funding of PLIC-USA’s AXXX and XXX reserves and its rebranding efforts. The
ratings also acknowledge the uncertainty regarding sales growth and potential
A.M. Best believes Commonwealth, FAFLIC, Commonwealth Re and PLIC-USA remain
well positioned at their current rating level. Negative rating actions could
occur if capitalization, operating performance or both fall markedly short of
A.M. Best's expectations. Negative rating pressures also could occur should
there be earnings pressure or a failure to successfully integrate current and
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. Best’s Credit Rating Methodology can be found at
A.M. Best Company is the world's oldest and most authoritative insurance
rating and information source. For more information, visit www.ambest.com.
Copyright © 2013 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.
Edward Kohlberg, 908-439-2200, ext. 5664
Senior Financial Analyst
Rachelle Morrow, 908-439-2200, ext. 5378
Senior Manager, Public Relations
William Pargeans, 908-439-2200, ext. 5359
Assistant Vice President
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
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