KBRA Assigns Rating to Heritage Life Insurance Company
30 Jun 2025 | New York
KBRA assigns an A- insurance financial strength rating (IFSR) to Heritage Life Insurance Company (HLIC). The Outlook for the IFSR is Stable. HLIC is a stock life insurance company domiciled in Arizona that reinsures life and annuity products as well as supplementary contracts. Current ownership acquired the company in 2012.
Key Credit Considerations
The rating on HLIC reflects solid capitalization, an experienced leadership team, and a conservative liquidity position. HLIC’s year-end 2024 CAL RBC ratio of 417% has improved from 2022 and 2023 and is supported by ongoing capital infusions, including a $500 million equity contribution in 2024 and a $600 million equity contribution in 2025 from its ultimate parent to fund new reinsurance transactions and growth. Executive leadership is long-tenured and has executed more than 30 reinsurance agreements with over 20 cedants since 2012. Liquidity is strong, with HLIC maintaining nearly $1.5 billion in cash and equivalents as of 1Q25. The investment portfolio is diversified with roughly 70% of invested assets held in bonds, over 90% of which are investment-grade. Supplemental borrowing capacity through FHLB lines and bank facilities, together with a disciplined duration‐mismatch limit, further supports HLIC’s capital position.
Balancing these strengths are HLIC’s concentration providing reinsurance for spread-based annuity products. This exposes the company to spread compression in falling-rate environments and disintermediation risk when rates rise, though spreads have thus far stayed at or above management's internal target. Enterprise risk management, while recently formalized, must continue to evolve to match the firm’s growing balance sheet and its ambition to pursue larger transactions. Earnings remain heavily dependent on a small number of treaties, heightening counterparty and concentration risk despite the ability to pause forward-flow business. Finally, HLIC operates in an increasingly competitive annuity reinsurance market dominated by larger, more established players; success in moving up-market will require disciplined underwriting and continued capital support.
Rating Sensitivities
Consistent operating and net income that results in internal generation of capital, material favorable variance to forecasts provided to KBRA and/or further diversification of HLIC’s liabilities could result in positive rating action. Material deterioration in risk-based capitalization below company targets, a material adverse change in risk profile and/or material unfavorable variance to forecasts provided to KBRA could result in negative rating action.
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