A.M. Best Affirms Credit Ratings of Kansas City Life Insurance Company and Its Subsidiaries

OLDWICK, N.J.–(BUSINESS WIRE)–A.M. Best has affirmed the Financial Strength Rating (FSR) of A
(Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) of
“a” of Kansas City Life Insurance Company (Kansas City Life).
Concurrently, A.M. Best has affirmed the FSR of A- (Excellent) and the
Long-Term ICRs of “a-” of Kansas City Life’s wholly owned subsidiary, Sunset
Life Insurance Company of America
and its final expense life
insurance subsidiary, Old American Insurance Company. The outlook
of these Credit Ratings (ratings) is stable. All companies are domiciled
in Kansas City, MO. These companies are collectively referred to as Kansas
City Life Group

The ratings of Kansas City Life reflect its adequate risk-adjusted
capital position and strong balance sheet with no long-term debt or
operating leverage, as well as Kansas City Life’s financial flexibility
and liquidity, which remain more than adequate to support the company’s
risk profile. Offsetting rating factors include the company’s lack of
consistent growth in ordinary life premium, above-average exposure to
interest-sensitive liabilities and material exposure to real estate,
particularly commercial mortgage loans.

Despite the inconsistent statutory earnings results, Kansas City Life’s
ability to deliver consistently profitable operating performance,
together with a reduction in the level of stockholder dividends as a
result of the reverse/forward stock split in 2015, has enabled the
company to maintain an adequate level of risk-adjusted capitalization.
Kansas City Life’s balance sheet remains strong, due in part to the
benefits from the liability-driven management of its products, which
primarily consists of fixed and variable annuities, universal life
insurance, and term life insurance. Kansas City Life’s investment
portfolio is composed mainly of high quality (NAIC class 1/2), publicly
traded, investment-grade fixed income securities. A.M. Best notes that
approximately 27% of invested assets are allocated to investments with
real estate exposure, which exposes the group to some concentration
risk, but A.M. Best believes this is partially offset by the group’s
strong sector and geographical diversification in the segment.

A.M. Best also is concerned about Kansas City Life’s trend of declining
operating profits for the last three years, due in part to the low-yield
environment and historically flat sales. In addition, a large portion of
reserves are subject to high minimum interest rate guarantees, which
could result in spread compression in future periods if interest rates
remain at current levels.

A negative rating action could occur if risk-adjusted capital were to
decline, or if operating trends decline further. In addition, a negative
rating action could be taken if Kansas City Life Group were to
significantly increase the risk profile of their investment portfolio,
leading A.M. Best to view the balance sheet as less secure.

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
Rating Activity
web page. For additional information
regarding the use and limitations of Credit Rating opinions, please view
Best’s Credit Ratings
. For information on the proper media
use of Best’s Credit Ratings and A.M. Best press releases, please view
for Media – Proper Use of Best’s Credit Ratings and A.M. Best Rating
Action Press Releases

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