AM Best downgrades credit ratings of Everlake Life Group Members

AM Best has downgraded the Financial Strength Rating (FSR) of Everlake Life Insurance Company and Everlake Assurance Company (collectively Everlake Life Group) to A (Excellent) from A+ (Superior), and the Long-Term Issuer Credit Ratings (Long-Term ICR) to “a+” (Excellent) from “aa-” (Superior). Both companies are based in Northbrook, IL. The outlook for these ratings has been revised to stable from negative.

The ratings reflect Everlake Life’s very strong balance sheet strength, strong operating performance, neutral business profile, and appropriate enterprise risk management (ERM).

The business profile was changed from favorable to neutral due to the competitive environment for annuity reinsurance, Everlake Life’s moderate market share, and similar reserve profiles to its peers. Despite the acquisition of new multiyear guarantee annuity business in 2023, Everlake Life’s reserve profile, which includes universal life with secondary guarantees and structured settlements, is expected to remain stable.

Everlake Life’s balance sheet benefits from its strong risk-adjusted capitalization, prudent asset liability management, and internal capital modeling. However, this is partly offset by affiliated reinsurance supporting a significant block of term life insurance. The operating performance remains strong, with three- and five-year return on equity ratios comparing well to peers and profits diversified between life and annuity products.

Future growth for Everlake Life will depend on successfully acquiring new business to offset the runoff of a large in-force block. The company has recently been more successful in this regard. Everlake Life’s ERM employs a three lines of defense strategy, with individual risk owners, an ERM committee, and an audit risk committee reporting to the board. AM Best believes a well-defined ERM program is necessary for the group’s complexities, and Everlake Life’s program meets this requirement effectively.