The ratings mainly reflect Fidelity Life’s supportive risk-adjusted capitalization and strong operating performance.

A.M. Best expects Fidelity Life’s capitalization to be maintained at an adequate level. Despite the high capital intensity of its distribution model, its risk-adjusted capitalization is expected to remain supportive of the current rating level, benefiting from its conservative underwriting leverage and a high quality reinsurance panel to support the capital requirement for its in-force business. Fidelity Life’s operating performance is strong with a five-year average return on equity of approximately 13%.

The major offsetting factor in Fidelity Life’s rating assessment is its relatively high reinsurance utilization.

While Fidelity Life ceded a larger portion of gross premiums to its reinsurers, this resulted in a smaller percentage of premium base retained within the company to spread its expenditures. Consequently, commissions and other expenses amounted to over 100% of net premiums; which makes operating results comparatively more sensitive to unfavorable movement in lapse rates, the cost of reinsurance and operating expenses.

Fidelity Life is well-positioned for its rating level; however, a significant deterioration in the operating performance or significant erosion in the risk-adjusted capitalization as a result of factors such as higher-than-expected lapse rates could place pressure on the ratings. In addition, downward pressure on the ratings could result if the company experiences difficulty to meet its target surplus policy.

Ratings are communicated to rated entities prior to publication, and unless stated otherwise, the ratings were not amended subsequent to that communication.

This press release relates to rating(s) that have been published on A.M. 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 A.M. Best’s Recent Rating Activity web page.

A.M. Best is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.