A.M. Best Co. has placed under review with positive implications the issuer credit rating (ICR) of “bb” and debt ratings of FBL Financial Group Inc. (FFG) (NYSE: FFG). In addition, A.M. Best has placed under review with developing implications the financial strength rating (FSR) of B+ (Good) and ICR of “bbb-” of EquiTrust Life Insurance Company (EquiTrust). Concurrently, A.M. Best has affirmed the FSR of A- (Excellent) and ICR of “a-” of Farm Bureau Life Insurance Company (Farm Bureau Life). The outlook for these ratings is stable. All companies are domiciled in West Des Moines, IA. (See below for a detailed listing of the debt ratings.) The under review status for the ratings of FFG and EquiTrust follow the announcement that FFG has agreed to sell EquiTrust to controlled affiliates of Guggenheim Partners, LLC, for a preliminary purchase price of $440 million in an all-cash transaction. Furthermore, the under review status for FFG reflects the intention of its management to redeem a total of $225 million in public and affiliated debt with the proceeds from the EquiTrust sale. A.M. Best expects that despite an anticipated loss on the transaction and plans for a stock repurchase authorization of $200 million that these initiatives will strengthen FFG’s quality of capital, financial leverage and interest coverage ratios, while providing more stability of earnings. Placing the ratings of EquiTrust under review are the result of the uncertainty with respect to its future business plans and capital structure following its acquisition by Guggenheim Partners, LLC. The ratings will remain under review until the transaction is completed, which is expected by year-end 2011 and pending A.M. Best’s discussions with the new management concerning its future strategic plans for EquiTrust. These discussions will include a review of products, expected sales and capital levels. Farm Bureau Life’s ratings acknowledge its consistently positive, but fluctuating operating earnings, excellent risk-adjusted capitalization levels and somewhat diversified premiums, which have displayed steady, positive trends.
Offsetting rating factors include Farm Bureau Life’s high portion of investments in structured securities relative to statutory capital and surplus, increasing exposure to interest-sensitive products in the current low interest rate environment and its increasing share of annuity sales growth as part of Farm Bureau Life’s product mix. A.M. Best notes that the business profile and operations of Farm Bureau Life will not be immediately and directly impacted by the sale of EquiTrust, since Farm Bureau Life is not part of the EquiTrust transaction.The following debt ratings have been placed under review with positive implications: FBL Financial Group Inc—-- “bb” on $75 million 5.85% senior unsecured notes, due 2014-- “bb” on $100 million 5.875% senior unsecured notes, due 2017 The following indicative ratings on securities available under its shelf registration have been placed under review with positive implications: FBL Financial Group Inc—- “bb” on senior debt- “bb-” on subordinated debt- “b+” on preferred stock FBL Financial Group Capital Trust II—- “b+” on trust preferred securities The principal methodology used in determining these ratings is Best’s Credit Rating Methodology -- Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best’s rating process and highlights the different rating criteria employed. Additional key criteria utilized include: “Understanding BCAR for Life and Health Insurers”; “Risk Management and the Rating Process for Insurance Companies”; “A.M. Best’s Perspective on Operating Leverage”; and “A.M. Best’s Ratings & the Treatment of Debt.” Methodologies can be found at www.ambest.com/ratings/methodology. Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com. Copyright © 2011 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.