|[January 13, 2021]|
AM Best affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long Term Issuer Credit Ratings (Long Term ICR) of “a +” from Equitable Financial Life Insurance Company of America (EFLICOA) (Phoenix, AZ ) and Equitable Financial Life Insurance Company (EFLIC) (New York, NY). EFLICOA and EFLIC are collectively called Equitable Life Group. The outlook for these Credit Ratings (ratings) is stable.
At the same time, AM Best affirmed the FSR of B + (Good) and the Long Term ICR of “bbb-” from Corporate Solutions Life Reinsurance Company (Corporate Solutions Life) (Wilmington, Delaware). In addition, AM Best affirmed the B ++ FSR (Good) and the long-term “bbb” ICR of Equitable Financial Life and Annuity Company (Equitable Financial Life & Annuity) (Englewood, CO). AM Best also affirmed Equitable Holdings, Inc.’s long-term “bbb +” ICR (based in New York, NY) and all of its long-term issue credit ratings (long-term IR). The outlook for these ratings is stable. See below for a detailed list of classifications of other subsidiaries and long-term IRs.
The Equitable Life Group’s ratings reflect the strength of its balance sheet, which AM Best classifies as very strong, as well as its strong operating performance, favorable business profile and adequate corporate risk management (ERM).
The Equitable Life Group’s ratings are attributed to its strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Index (BCAR), its strong financial flexibility, well-developed risk management practices and its position among leaders market share in variable annuities (VA), variable universal life and 403 (b) retirement annuities. Through its affiliate AllianceBernstein, the group continues to maintain a significant global asset management footprint, which provides a material source of unregulated cash flow for the holding company. In addition, the company has recorded consistently strong operating gains in recent years, albeit with some volatility, but it is well diversified across business lines. Equitable Holdings’ consolidated financial leverage is still considered moderate, but has increased somewhat due to the issuance of perpetual preferred shares.
AM Best notes that the holding company maintains access to a contingent capital mechanism, which further increases the group’s positive financial flexibility. The Equitable Life Group also benefits from a diversified and productive distribution model, which includes a large captive distribution channel, as well as extensive distribution relationships with third parties. Strong overall liquidity is further supported by a new additional program of notes guaranteed by a financing agreement.
Although the Equitable Life Group intends to keep its capital profile adjusted to the strongest risk in the future, it remains exposed to capital market pressures on both sides of its balance sheet. These exposures emanate from its variable insurance products with guaranteed benefits, as well as from the potential volatility in asset fee income as a result of changes in market value in its large accounting book separate from business and derivative activities. To partially mitigate these exposures is Equitable Holdings’ recent agreement with Venerable Holdings, Inc. to reinsure $ 13 billion of legacy VA policies sold between 2006 and 2008, which includes the sale of VA reinsurance entity, Corporate Solutions Life. The transferred block is approximately 33% of the company’s fixed-rate minimum benefit business or approximately 13% of the total VA business in effect on June 30, 2020, and is expected to release approximately $ 800 million of regulatory capital. The closing of this transaction is scheduled for the second quarter of 2021, and should significantly reduce your exposure to VA guarantees in your books.
AM Best also notes that Equitable Life Group continues to maintain an appropriate ERM structure after its initial public offering, with a focus on hedge strategies to protect its statutory and economic capital. The company upgraded its economic capital model to be more US-centered, moving from a Solvency II structure to a capital model centered on post-IPO US contingent / economic capital and risk-based tail expectations.
Corporate Solutions Life’s ratings reflect the balance sheet strength, which AM Best classifies as strong, as well as its marginal operating performance, very limited business profile and adequate ERM.
Equitable Financial Life & Annuity’s ratings reflect the balance sheet strength, which AM Best classifies as adequate, as well as its marginal operating performance, limited business profile and appropriate ERM.
The following long-term IRs were assigned with a stable outlook:
Equitable Holdings, Inc.-
– “bbb-” over $ 800 million 5.25% in preferred shares, maturing in 2024
– “bbb-” over $ 500 million 4.95% of preferred shares, due 2025
– “bbb-” on $ 300 million of preferred shares of 4.30%, maturing in 2026
Equitable Financial Life global financing – program classification “a +”
– “a +” in $ 650 million senior unsecured notes of 1.4%, due in 2025
– “a +” in $ 500 million in senior unsecured notes of 1.4%, due in 2027
The following long-term IRs have been stated with a stable outlook:
Equitable Holdings, Inc.-
– “bbb +” in $ 1.5 billion of 5.0% in senior unsecured debentures, due in 2048
– “bbb +” in $ 1.5 billion of 4.35% in senior unsecured debentures, due in 2028
– “bbb +” in $ 800 million in senior unsecured bonds of 3.9%, due in 2023
– “bbb +” in $ 350 million of senior unsecured debentures of 7.0%, maturing in 2028 (originally issued by AXA Financial, Inc.)
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