A.M. Best Downgrades Ratings of American Health and Life Insurance Company

A.M. Best Co. has downgraded the financial strength rating (FSR) to A- (Excellent) from A (Excellent) and issuer credit rating (ICR) to “a-” from “a” of American Health and Life Insurance Company (AHLIC). Additionally, A.M. Best has affirmed the FSR of A- (Excellent) and ICR of “a-” of Sears Life Insurance Company (Sears Life).

Concurrently, A.M. Best has affirmed the FSR of A (Excellent) and ICR of “a” of Triton Insurance Company (Triton). The outlook for all ratings is stable. These companies are all members of Citi Assurance Services Group (CAS), which is ultimately owned by Citigroup Inc. [NYSE: C]. All insurance companies are domiciled in Fort Worth, TX.

The downgrade of AHLIC’s ratings reflects its recent declining premium, as reflected in the company’s business profile, which is primarily focused on the sale of credit insurance products, along with its exposure to downturns in the financial products marketplace and A.M. Best’s view that the company has a reduced strategic value to its ultimate parent. Despite a one-time net premium increase as a result of a reinsurance assumed transaction with a former affiliated company, National Benefit Life Insurance Company, A.M. Best notes that AHLIC’s top line premium growth has recently declined. This decline is due to a reduction in loan volume from CitiFinancial Credit Company (CCC), Citigroup Inc.’s consumer finance business, due to the credit market dislocation. Additionally, like Triton, AHLIC’s capital and surplus funds have declined in recent years, largely due to the company’s significant dividend payments to Citigroup Inc.

Additionally, the ratings recognize AHLIC’s strong risk-adjusted capitalization, consistently positive statutory operating results and continued sales of its core credit products.

The ratings for Sears Life acknowledge its strong risk-adjusted capitalization and continuing operating profitability. These positive rating factors are offset by Sears Life’s nominal business position within CAS and its anticipated future declining trends in life/health premium activities and earnings performance.

The ratings for Triton, CAS’ property/casualty operation, recognize its historically strong operating performance and superior risk-adjusted capitalization, albeit declining, which is largely due to the company’s significant dividend payments to Citigroup Inc. These positive factors are reflective of management’s expertise in consumer finance oriented products and Triton’s conservative underwriting leverage.

Partially offsetting these positive rating factors are Triton’s distribution dependence on CCC and the underwriting sensitivity of its involuntary unemployment insurance business regarding initial unemployment claims filed in the United States and Canada. This is evidenced by Triton’s substantially lower underwriting profitability in 2008 an 2009 and its rebound in underwriting profitability in 2010 as well as the first half of 2011.

The principal methodology used in determining these ratings is Best’s Credit Rating Methodology -- Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best’s rating process and highlights the different rating criteria employed. Additional key criteria utilized include: “Risk Management and the Rating Process for Insurance Companies”; “Rating Members of Insurance Groups”; “Understanding BCAR for Life and Health Insurers”; and “Understanding BCAR for Property/Casualty Insurers.” Methodologies can be found at http://www.ambest.com/ratings/methodology.

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