American Health and Life Insurance, Sears Life Insurance and Triton Insurance Companies

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A.M. Best Co. has affirmed the financial strength ratings (FSR) of A- (Excellent) and issuer credit ratings (ICR) a- of American Health and Life Insurance Company (AHLIC) and Sears Life Insurance Company (Sears Life). Concurrently, A.M. Best has affirmed the FSR of A (Excellent) and ICR of a of Triton Insurance Company (Triton). The outlook for all ratings is stable. These companies are ultimately owned by Citigroup Inc. [NYSE: C]. All companies are domiciled in Fort Worth, TX.
AHLIC’s ratings reflect its stabilizing premium trends and favorable capitalization, partially offset by its continued exposure to downturns in the financial products marketplace and A.M. Best’s view that the company has a reduced strategic value to its ultimate parent. Despite a one-time 2010 net premium increase resulting from a reinsurance transaction with a former affiliated company, National Benefit Life Insurance Company, A.M. Best notes that AHLIC’s top line premium growth has remained flat over the past year, triggered by lower average loan volumes in 2011 and 2012 from OneMain Financial and CitiFinancial Canada, Citigroup Inc.’s consumer finance business. However, AHLIC has seen an improvement in its average loan values in 2013. Although there has been a decrease in AHLIC’s capital and surplus average balance over the past three years, it is primarily due to large dividend payments to Citigroup Inc., with the objective to right size its capital balance and maintain above average risk-based capital ratios. AHLIC is included in Citi Holdings, which are businesses and portfolios of assets that Citigroup Inc. has determined are not central to its core business. Despite recent shareholder dividend payments, AHLIC maintains strong risk-adjusted capitalization ratios, consistently positive statutory operating results and continued sales of its core credit products and other specialty products.

The ratings of Sears Life acknowledge its strong risk-adjusted capitalization and continuing operating profitability. These positive rating factors are offset by Sears Life’s nominal business position within Citi Assurance Services, Inc. (CAS) and its anticipated future declining trends in life/health premium activities and earnings.

The ratings of Triton, CAS’ property/casualty operation, recognize its historically strong operating performance and superior risk-adjusted, albeit declining, capitalization, which is largely due to its significant dividend payments to Citigroup Inc. These positive rating factors are reflective of Triton’s management’s expertise in consumer finance oriented products and the company’s conservative underwriting leverage.

Partially offsetting these positive rating factors are Triton’s distribution dependence on OneMain Financial and CitiFinancial Canada and the underwriting sensitivity of its involuntary unemployment insurance business regarding initial unemployment claims filed in the United States and Canada. This is evidenced by Triton’s substantially lower underwriting profitability in 2008 and 2009, and its rebound in underwriting profitability in more recent years.

While the companies are well positioned at their current rating levels, there could be negative pressure on the ratings and/or outlook should operating performance or risk-based capital measures materially deteriorate or any material change should occur in the rating of Citigroup Inc.

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process.


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