OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Best Co. has downgraded the financial strength rating to B- (Fair) from B (Fair) and issuer credit rating to "bb-" from "bb" of Bankers Life Insurance Company (Bankers Life) (St. Petersburg, FL). The outlook for both ratings has been revised to negative from stable.

The ratings reflect Bankers Life's weak capital levels on both an absolute and risk-adjusted basis. The decline in its Best's Capital Adequacy Ratio is due in part to the company's increased exposure to below investment grade bonds due to downgrades in prime and Alt-A residential mortgage backed securities. This direct exposure is mitigated by the underlying credit enhancements and priority to cash flows. Additionally, Bankers Life holds certain types of collateralized mortgage obligation (CMO) investments that tend to be more volatile, however these types of securities have been used primarily for hedging purposes. Currently, the market value of the bond portfolio is significantly below its statutory book value; however current book yield and investment income remain stable.

In recent years, the company has fluctuated between periods of increased new annuity production and limited production in order to manage operating results and capital. In first quarter 2009, Bankers Life suspended its annuity sales in an effort to maintain capital levels.

The revised outlook recognizes the potential for additional realized investment losses, given Bankers Life's significant level of unrealized losses, which would further weaken its balance sheet strength.


Offsetting these negative factors are Bankers Life's good surrender charge protection on its in-force annuity portfolio; decreasing disintermediation risk and the recent improvement in the company's earnings performance.

For Best's Credit Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.

The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.



A.M. Best Co.

Analysts:

Andrew Gold, 908-439-2200, ext. 5487

andrew.gold@ambest.com

or

Richard McMillan, 908-439-2200, ext. 5615

richard.mcmillan@ambest.com

or

Public Relations:

Jim Peavy, 908-439-2200, ext. 5644

james.peavy@ambest.com

or

Rachelle Morrow, 908-439-2200, ext. 5378

rachelle.morrow@ambest.com



Source: A.M. Best Co.