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Lincoln National (LNC) Units Get Rating Actions From AM Best

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Credit rating agency AM Best recently asserted the Financial Strength Rating (FSR) of A+ and the Long-Term Issuer Credit Ratings of “aa-“ of Lincoln National Corporation’s (LNC - Free Report) key life/health insurance units, namely The Lincoln National Life Insurance Company and its wholly owned arm, Lincoln Life & Annuity Company of New York.

The credit rating giant has also affirmed the FSR of A and the Long-Term ICR of “a+” for the company’s affiliates, Liberty Life Assurance Company (LLAC) of Boston and First Penn-Pacific Life Insurance Company (FPP). Notably, AM Best has also confirmed the Long-Term ICR of “a-” and all current Long- and Short-Term Issue Credit Ratings.

The outlook of all the ratings is stable.

Rationale Behind the Ratings

The ratings reflect the company’s solid balance sheet, a robust operating performance, favorable business profile and an impressive enterprise risk management (ERM). The same has constantly delivered favorable premium trends and solid statutory plus GAAP earnings, which help boosting capital and risk-adjusted capitalization.

However, the agency’s view of the company’s capital is partially offset due to the usage of captives and external reinsurance for its XXX and AXX reserves. Moreover, capital growth has been restricted by dividends to the holding company.

The ratings of LLAC show its sturdy balance sheet, adequate operational efficiency, limited business profile and an impressive ERM. As part of its prior buyout, LLAC entered into reinsurance deals to cede all insurance reserves to Lincoln National Life and a non-affiliated reinsurer, thereby restricting its business profile. These ratings also assure disciplined capital maintenance from Lincoln National to back LLAC’s capital above regulatory minimums.

The ratings of FPP highlight its solid balance sheet, operating excellence, constrained business profile along with a potent enterprise risk management. The ratings also replicate the financial stability of the parent company and its inclusion into Lincoln National’s management and risk management services. However, the company has been placed in runoff and also maintains a huge proportion of reserves regarding interest-sensitive products with high-guaranteed low crediting rates.

Shares of this Zacks Rank #3 (Hold) company have lost 22.8% in a year’s time, wider than its industry's decline of 15.8%.


Stocks to Consider

Investors interested in the same space can take a look into some better-ranked stocks like GWG Holdings, Inc , Athene Holding Ltd. and FGL Holdings (FG - Free Report) , all holding a Zacks Rank #2 (Buy).

GWG Holdings works as a financial services company. The company managed to pull off an average four-quarter positive surprise of 143.72%.  

Athene Holding issues, reinsures and acquires retirement savings products in the United States, the District of Columbia and Germany. It came up with average trailing four-quarter earnings surprise of 17.37%.

FGL Holdings and subsidiaries sell individual life insurance products and annuities in the United States. The company’s average four-quarter beat is delivered at 6.47%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

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