KBRA Affirms Ratings for SILAC Insurance Company and Sterling Investors Life Insurance Company
9 May 2025 | New York
KBRA affirms the Insurance Financial Strength Ratings (IFSR) of BBB for SILAC Insurance Company ("SILAC") and Sterling Investors Life Insurance Company ("Sterling"). The Outlook remains Stable for both ratings.
KBRA’s rating reflects SILAC’s solid capitalization, favorable growth in total adjusted capital, and continued profitability supported by investment spread income. At year-end 2024, the company reported a 23% increase in total adjusted capital to $707 million and a CAL RBC ratio of 401%, exceeding its internal target. SILAC has also demonstrated growth in its actively managed IMO network, with no individual IMO accounting for more than 25% of submitted premium, and a strong agent loyalty program that continues to support production. Disintermediation risk remains low as all annuity liabilities remain subject to surrender protection or market value adjustments.
Balancing these strengths, SILAC continues to rely on a concentrated panel of unaffiliated reinsurers to manage capital and growth, with the majority of ceded liabilities placed with Heritage Life Insurance Company (Heritage) and Hildene Re (formerly Ludlow Re, a Hildene affiliate). Although actively managed, this structure presents ongoing counterparty concentration risk. The investment portfolio remains concentrated in structured credit and private assets. Below investment grade exposure remains elevated, with a BIGs-to-TAC ratio of 147%. The company also operates in a highly competitive FIA market dominated by larger, higher-rated peers, and its earnings model remains concentrated in spread-based products, which are sensitive to interest rate and credit spread movements.
Additionally, KBRA notes that the U.S. tariff environment remains fluid. While SILAC is not directly exposed from an underwriting perspective, its asset portfolio – concentrated in credit-sensitive sectors – may be indirectly affected by broader economic volatility.
Continued internal capital generation with a demonstrated track record of consistent earnings, broadening of reinsurance counterparty base and reduced reliance on a concentrated panel, and sustained risk-based capitalization above target level could result in positive rating action. Material adverse change in investment or reinsurance risk profile, including deterioration in liquidity or increase in exposure to illiquid assets, operating results that significantly underperform forecasts provided to KBRA, or inconsistent earnings due to asset volatility or hedging misalignment, and/or departure of a key member of senior management without an effective succession plan could result in negative rating action.
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