Moody’s affirms IFS of Security Life

Moody's Investors Service has affirmed the Baa1 insurance financial strength (IFS) rating of Security Life of Denver Insurance Company (SLD) but changed its outlook to stable from negative. The company is owned by the US holding company of Resolution Life Group Holdings (RLGH), a Bermuda-based private investor-backed insurance group that acquires and manages portfolios of life insurance business.

Moody's said the rating affirmation of SLD, which serves as the new US platform for some of RLGH's US-based business, is based on the “relatively simple” profile of the company's in-force liabilities, acquired with SLD, which are largely composed of life insurance and various annuity contracts.

The company's National Association of Insurance Commissioners’ risk-based capital ratio (RBC), at 414% at year-end 2021, was also strong. SLD closed on its second acquisition of a $9.4 billion block of largely institutional life insurance (COLI/BOLI) from Lincoln National Life Insurance Company via reinsurance in September 2021.

These strengths are mitigated, Moody’s said, by the company's limited track record as an acquirer of life insurance blocks (albeit with prior experience within the Resolution group), and RBC capital that is more sensitive to a downside scenario than peers with similar business profiles.

SLD is also exposed to interest rate risk (i.e., prolonged low interest rates or spikes, and/or policyholder behaviour different than assumptions) through its blocks of guaranteed universal life insurance and COLI/BOLI. Moody's expects the company to maintain adequate sources of capital and liquidity within the US holding company and the RLGH group.

The rating agency said stabilisation of the outlook reflected greater clarity about consolidated leverage and coverage at RLGH, a private company whose investors include institutional investors, and about SLD's investment portfolio. Although Moody's anticipates SLD to reinvest a portion of its securities into less liquid assets, including commercial mortgage loans and structured securities, over the next two years to increase returns for its owners/investors, it expects portfolio quality to remain high, with an asset and liquidity profile consistent with peers.