Moody's Investor Service, one of the big credit rating agencies, downgraded the insurance financial strength of Lincoln Benefit Life Co., with a negative outlook, as A.M. Best, which rates insurers, placed the company under review with negative implications.
Both actions come from the announced acquisition of Lincoln Benefit Life last week from Allstate Insurance Co. by Resolution Life Holdings. The acquiring company plans for Lincoln Benefit Life, which is based in Lincoln, to quit selling new life policies and annuities and to wind down the business over time.  Â
Whether the negative implications of the agencies' actions have any effect on Lincoln Benefit Life's future remains to be seen. If it's not seeking investments or borrowing money by issuing debt or commercial paper or seeking investments, it may not make much difference at all.Â
Moody's lowered the Lincoln Benefit rating to Baa1 from A1. Obligations rated A1 are judged to be upper-medium grade and are subject to low credit risk. Obligations rated Baa are judged to be medium-grade and subject to moderate credit risk and as such may possess certain speculative characteristics.
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Resolution Life Holdings is paying $600 million in a transaction expected to close during the second half of the year.
The jettisoning of Lincoln Benefit Life by Allstate Life forced Moody's to examine the company on its fundamental credit profile, standing alone, without benefiting from the Allstate brand, the agency said.
Moody's does not see a bright future for Lincoln as indicated with its negative outlook. The credit ratings agency views Resolution, an aggregator in the life insurance and annuity sector, as inclined "to more aggressively manage Lincoln's capital and investments" once the transaction closes.
Allstate had no comment on the ratings.Â
A.M. Best Co. placed under review with negative implications the financial strength rating of A+ (Superior) and the issuer credit rating of aa- of Lincoln Benefit Life, since the acquisition announcement of last week. According to Best, aa is superior and b is marginal.Â
Historically, LBL has operated as Allstate Financial's independent agent marketing arm offering an array of life insurance and annuity products and reinsuring the vast majority of the business to Allstate Life Insurance Co., Best said. "The rating actions reflect A.M. Best's prospective view that LBL will lose the benefits derived from being affiliated with Allstate -- that is, the financial, reinsurance and operational support the policyholders have historically received. The loss of these benefits could also impact the persistency of the business being acquired by Resolution Life."
The under-review status reflects uncertainty about LBL's potential new owner, as A.M. Best said it has had no conversations with Resolution Life's management regarding its business strategy and ability to maintain adequate levels of capital. Best said Resolution Life is not rated by any other nationally recognized statistical rating organization.
The agency said there is a significant likelihood of material rating downgrades once the acquisition closes.