Thursday, November 20, 2008

Life Insurance Company Stability: More Info

A few weeks ago I wrote about about how I was starting to become concerned about the stability of my life insurance company - Protective Life. Last week I got more information on the subject. It appears that Protective Life was downgraded by a couple of credit rating agencies, however according to the language of the downgrade the situation appears to be stable. From the downgrade announcement
"This rating action reflects Fitch's view that the risk-based capital level of PL's primary life insurance subsidiaries has deteriorated in 2008 and will continue to be pressured over the near term due to investment losses and reserve strain associated with the company's term life insurance business. The ongoing turmoil in the credit markets has limited PL's financial flexibility and put pressure on its ability to access funding to improve its capital position...

...Importantly, Fitch believes that PL's liquidity position is sound. The company has no significant debt maturing until 2013 and has cash and liquid assets to meet maturing obligations at the holding company and operating company levels. Further, PL has below-average equity market exposure given the company's relatively modest variable annuity business and negligible exposure to unaffiliated common stock. Equity-adjusted leverage remains within expectations, and interest coverage, while down from prior quarters, is reasonable."
The way I read this, my life insurance company is hurting because their portfolio is down, but they are not under any imminent threat of insolvency or any burning need to raise cash. 

I will continue to monitor the situation, but it looks like there is no cause for immediate alarm.

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