A.M. Best Affirms Credit Ratings of Lombard International Life Assurance Company and Its Subsidiary

A.M. Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Ratings of “a-” of Lombard International Life Assurance Company (LILAC) and its direct subsidiary, Lombard International Life Assurance Company of New York. Collectively, the two companies are referred to as the Lombard Life Group. Both companies are headquartered in Philadelphia, PA. The outlook of these Credit Ratings (ratings) is stable. LILAC’s ultimate holding company, LIA Holdings, Ltd., is owned by funds managed by the Tactical Opportunities Group of The Blackstone Group L.P. (Blackstone) [NYSE: BX].

The ratings reflect the Lombard Life Group’s balance sheet strength, which A.M. Best categorizes as very strong, as well as its marginal operating performance, adequate business profile and appropriate enterprise risk management. The group maintains a strong position in the privately placed U.S. life and annuity markets. The group’s business and liability profile contributes to its strength as it is primarily a separate account product platform in which policyholders take the investment risk. As a result, separate accounts make up the vast majority of total assets. There are no living benefit guarantees and mortality risk is minimal, with $125,000 retained per life and the rest being ceded to a variety of reinsurers. The group’s operations also are supported by its strong balance sheet, with the majority of its general account assets held in investment grade bonds and policyholder loans. Its risk-adjusted capitalization, which is supplemented by the group’s lower risk liability structure, is considered strongest, consistent with A.M. Best’s rating guidelines.

Most recently, the Lombard Life Group has had positive asset growth, driven by good net deposits and strong investment performance, while at the same time controlling general expenses. Although LILAC was profitable prior to 2015, in recent years, the company has reported modest losses as it makes expenditures to enhance its distribution network. Much of this work was completed in 2017. A.M. Best expects the group to produce favorable and more stable results over time as it executes on its domestic ultra-high net worth private placement strategy and increases is scale. A.M. Best views positively the organization’s role within the broader operations of LIA Holdings, Ltd.

Partially offsetting these positive rating factors are the challenges related to operating in the niche ultra-high net worth business, given the complexity of the customized products and services offered. The group also remains susceptible to an ever-changing regulatory landscape with respect to domestic and international taxation. A.M. Best also notes the inherent unevenness of various financial metrics and the company’s strong but below average risk-adjusted capitalization relative to similarly rated life companies. Operating performance has historically reflected the impact of the low volume, high premium nature of the private placement market, which can cause volatility in various financial metrics and material investments into the company’s distribution platform, and has resulted in some one-time charges.

This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.

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