AM Best Affirms Credit Ratings of Homesteaders Life Company

AM Best has 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). Concurrently, AM Best has affirmed the Long-Term Issue Credit Rating of “bbb-” (Good) of the $20 million, 7.75% surplus notes due 2053, and the $20 million 7.75% surplus notes due 2053. The outlook of 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 (ERM).

Homesteaders’ balance sheet strength assessment reflects its strong risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). AM Best notes that while the company’s capital position remains within the strong category, there has been a consistent year-over-year decline in absolute and risk-adjusted capital levels, attributable to strategic investments in the company’s non-insurance subsidiaries. These investments, such as eFuneral Solutions, help grow core pre-need insurance markets and improve strategic distribution partnerships. The investments, however, are non-admitted on a statutory basis. Homesteaders’ capital position also was impacted by the write-off of all remaining assets related to the company’s Scottish Re reinsurance treaty in 2023.

Homesteaders’ balance sheet strength assessment also is reflective of its high quality, liquid investment portfolio primarily consisting of investment grade bonds. Financial leverage and coverage metrics are consistent with Homesteaders’ current ratings. Operating leverage remains low but increased slightly as the company expanded its Federal Home Loan Bank spread program. Homesteaders’ adequate operating performance is reflective of consistent operating results, driven by net investment income and realized capital gains. Supporting Homesteaders’ strong balance sheet strength assessment and adequate operating performance is its neutral business profile as a leader in pre-need insurance markets despite increasing competitive pressures and funeral home consolidation. The company’s ERM program remains appropriate for its risk profile.

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.

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