AM Best has revised the outlooks to stable from positive and affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb+” (Good) of EquiTrust Life Insurance Company (EquiTrust) (headquartered in Chicago, IL).

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

The outlook revisions to stable from positive reflect the elevated financial leverage and pressured interest coverage at EquiTrust’s recently formed new parent entity, Amistad Financial Group, LLC (Amistad). EquiTrust currently accounts for most of the earnings within the Amistad organization, which may create pressure to support debt service for its parent.

The company’s absolute capital and surplus levels have increased over the past several years due to a consistent trend of favorable operating results and no declared dividends. EquiTrust also maintains a strong liquidity profile with steady operating cash flows, solid surrender protection on in-force annuity business and additional borrowing capacity through the Federal Home Loan Bank. EquiTrust’s reinsurance leverage has declined over the past several years, though the company utilizes some affiliated and unrated carriers for some of its reinsurance needs. Premiums have trended upward in recent periods through favorable annuity sales. AM Best notes that EquiTrust has elevated exposures to Level 3 assets, including structured securities within the investment portfolio and less-liquid assets. Partially mitigating this concern is EquiTrust’s well-managed investment portfolio, which has good diversity by sector and a low level of impairments.

Within the company’s operating performance, net income has been consistently positive in recent years, with high returns on equity, along with the increased premium volume. This has been supported by interest spreads, which have remained steady with increasing crediting and earned rates.

EquiTrust’s business profile remains neutral while the organization has added new distribution relationships, which have led to additional sales in the competitive annuity market. The ERM assessment remains appropriate, supported by a comprehensive and evolving risk management framework.

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