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

The ratings reflect Everlake Life’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management (ERM).

The change in Everlake Life’s business profile assessment to neutral from favorable reflects the strong competitive environment for bidding on flow reinsurance of annuities; Everlake Life’s moderate market share and reserve profile; and is similar to peers with a strategy of seeking flow reinsurance of annuities. Everlake Life’s reserve profile, which includes universal life with secondary guarantees and structured settlements, is unlikely to change in the near term, even with the successful acquisition of additional multiyear guarantee annuity business, which was done in 2023 and is expected to continue.

Everlake Life’s balance sheet strength assessment benefits from its strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), prudent asset liability management and development of its own internal capital modeling. This is partially offset by affiliated reinsurance in support of a significant block of term life insurance. The operating performance continues to be assessed as strong given the three- and five-year return on equity ratios, which compare well against other strong-level peers, in addition to diversified profits between ordinary life and individual annuity products.

Everlake Life’s growth will be dependent on management successfully executing its strategy to acquire new business given the run-off of a large in-force block, but management has recently been more successful in acquiring new business. The ERM approach employs a typical three lines of defense strategy, including individual risk owners in the business areas, an ERM committee and an audit risk committee that reports directly to the board of directors. Risk appetite and tolerance statements with limits and triggers are quantitative and clear. AM Best is of the opinion that a complex and well-defined ERM program is necessary given the complexities of this group, and this assessment for Everlake Life is well-placed at the appropriate level.

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