Are Life Insurance Company Downgrades on the Rise?

(Regular users  click here  to go directly to Recent Downgrades.)

Life insurance company rating downgrades are up to 25 in Q4 of 2004 after reaching a recent low of only 12 in Q3 of 2004.  Is this the financial downgrade bounce?  If so, is this the beginning of a trend towards a steady rise to the degradation of insurance companies? 

Ratings downgrades typically reflect the effects of erosion of investment values and may signal a drop in an insurer's reserves or profitability.  In response to lower ratings, downgraded insurers are more likely to increase premiums to replenish these reserves, improve profits, and re-establish financial strength and claims-paying ability ratings.

Thus, while buyers usually use ratings of financial strength and claims-paying ability to identify those insurers most likely to pay future death benefit claims, a decline in ratings can also signal increases in policy costs and corresponding increases in required premiums.  Consequently, financial strength and claims-paying ability ratings should be monitored not just at the time of purchase but regularly throughout the life of the policy.

Give Clients Quality Assurance

Downgrades in insurers' financial strength and claims-paying ability ratings offer Advisors promising opportunities to add life insurance portfolio management services to their practice.  While ratings downgrades may signal an increase in premium costs, these ratings are only one of several factors to consider when evaluating the appropriateness of a permanent life insurance policy.  A drop in ratings presents an opportunity to add value, improve performance, or enhance policy suitability.

Use the Confidential Policy Evaluator (CPE) Report to add a unbias 3rd party to your policy reviews.  CPE converts the dozens of pages, hundreds of numbers, and lengthy disclosures typically found in a single policy illustration into a comprehensive, yet concise report.  CPE gives you an easy-to-use tool that goes well beyond a simple comparison of illustrations and ratings.  With CPE, you'll know how your client's policy measures up to benchmarks for all products in its peer group.  

To fully assess the impact of changes in policy variables to your clients' permanent life insurance portfolios, or to establish a baseline by which to judge the impact of future shifts in variables, request a CPE Report now.  Just fax the detailed expense report  from the policy_illustration toll free to 800-409-3222 to request a CPE Report for your client's policy.  If the policy illustration is not available, download a sample Request for Information (RFI) letter to gather the necessary policy information.

Recent Downgrades

During the fourth quarter of 2004 (i.e., between October 1, 2004 and December 31, 2004), ratings downgrades for the following insurers were reported by one or more of the rating services that evaluate the financial strength and claims-paying ability of insurance companies.  (Downgrades reported here are provided by VitalSigns, a service of Lifelink Pro.  Click here to request a detailed financial report on one or more of the insurers below, either directly from LifeLink or from your local TIA Insurance BankingTM Center.)


Acacia Life

American Bankers

American General Assr

American Income

American Skandia

Ameritas Life

Ameritas Variable

Aurora National

Banner Life

Central States H&L

Centre Life Ins Co

ERC Life Reins

Fidelity & Guaranty

Fidelity & Guaranty of NY

Guarantee Trust

Health Net Life Ins Co

Mutual of America

Pacific Life

Pacific Life & Ann

Thrivent Finl for Lutherans

Trans World Assurance

Trustmark Ins Co

Trustmark Life Ins

Utica National Life

William Penn of NY