AM Best has assigned a Financial Strength Rating of B- (Fair) and a Long-Term Issuer Credit Rating of “bb-” (Fair) to Upstream Life Insurance Company (Upstream Life) (Dallas, TX). The outlook assigned to these Credit Ratings (ratings) is stable.

The ratings reflect Upstream Life’s balance sheet strength, which AM Best assesses as weak, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management (ERM).

Upstream Life’s risk-adjusted capitalization is assessed at the very strong level, as measured by Best’s Capital Adequacy Ratio (BCAR). This is offset by increased reinsurance leverage and dependence on unrated reinsurers, limited financial flexibility, increased financial leverage at the holding company level and volatility in balance sheet metrics. AM Best expects Upstream Life’s risk-adjusted capitalization to remain at current levels.

Although operating results were profitable in 2023 and through second-quarter 2024, there were significant operating losses in 2019-2022. Additionally, there has been significant volatility in premium levels and operating earnings over the past five years, though results have been more consistent since the beginning of 2023.

The company is licensed in 25 states and offers a multiyear guaranteed fixed annuity product. Product diversification is somewhat limited and the companies within the annuity space face high levels of competition. While the ERM governance structure and framework has improved in recent years, the company faces significant challenges with a concentrated liability portfolio and limited financial flexibility.

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