KBRA assigns BBB insurance financial strength ratings to SILAC Insurance Company ("SILAC") and Sterling Investors Life Insurance Company ("SILIC"). The Outlook for both ratings is Stable.

The ratings reflect solid capitalization with favorable growth trends in capital, a seasoned management team, minimal exposure to disintermediation risk, and expanded distribution with a focus on independent agents. SILAC’s year-end 2023 CAL RBC of 375% is solid and above target levels. Demonstrated growth in capital has been favorable, benefiting from solid earnings as well as significant capital contributions. As SILAC has no legacy annuity business, disintermediation risk is substantially mitigated as all new business since launch remains subject to surrender charges and the company strives to maintain competitive crediting rates. SILAC has also demonstrated growth in its core of independent marketing organizations (IMOs) and agent relationships. Balancing these strengths are strong competition in key product lines, exposure to potential spread compression, reliance on reinsurance and counterparty concentration risk, elevated investment risk, and key person risk. SILAC’s key products are fixed indexed annuities, which have substantial competition from established market participants with strong franchises, broader distribution reach, as well as access to significant capital. Product development is a strength and SILAC is focused on developing additional products to drive sales and maintain market share. The company’s earnings stream is somewhat concentrated and exposed to changes in interest rates and credit spreads. Utilized as part of the company’s strategy to manage strain and scale assets, SILAC is reliant on reinsurance and exposed to concentration risk. Counterparty credit risk is somewhat offset by the strong credit quality of some of its reinsurers as well as active management of reinsurance programs, including the swift recapture of select reserves earlier this year.

SILAC Insurance Company is a life and health insurer that markets annuity products to its target middle market customers across a robust distribution network. Sterling Investors Life Insurance Company, a wholly owned subsidiary of SILAC, is a life and health insurer, with a mix of life, annuity, and individual health business. At both entities, non-annuity legacy business is in run-off and the majority of liabilities are reinsured. Both companies are domiciled in Indiana.

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Methodologies

• Insurance: Insurer & Insurance Holding Company Global Rating Methodology
• ESG Global Rating Methodology

Disclosures

Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider.

Doc ID: 1004207

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