The ratings of Bermudian-based Prosperity Life Assurance Limited remain unchanged following the announcement of a billion dollar merger involving a related company, AM Best has commented.

The ratings agency said the financial strength rating of A- (Excellent) and the long-term issuer credit ratings of “a-” (Excellent) of Prosperity Life Group’s subsidiaries remain the same.

In addition to the Bermudian-based entity, the subsidiaries are Shenandoah Life Insurance Company of Virginia, SBLI USA Life Insurance Inc of New York, and S.USA Life Insurance Company Inc of Phoenix.

AM Best’s comment follows the news that a definitive merger agreement has been reached whereby S.USA, a subsidiary of Prosperity Life Group, and PHG Merger Inc (a subsidiary of S.USA), will acquire National Western Life Group Inc in an all-cash transaction valued at approximately $1.9 billion.

The outlook of these credit ratings will remain stable.

AM Best said the transaction is expected to add additional scale, a diverse liabilities profile and strong capitalisation, with continued investment in infrastructure, while preserving liquidity.

It said the acquisition represents a continued strategy of significant expansion of Prosperity Life Group’s insurance business.

The merger will be funded through a combination of cash from internal sources, a capital commitment from affiliates of Elliott Investment Management LP, its parent and additional borrowing under existing facilities.

The merger is expected to close in the first half of 2024, subject to regulatory approvals.

AM Best said there is a plan to re-domesticate National Western Life Insurance Company to Arizona (the domestic state of S.USA) from Colorado, which will be a condition to the closing of the transaction.

Ozark National Life Insurance Company, a subsidiary of National Western, will remain domiciled in Missouri.

AM Best said it will continue to closely monitor the transaction and the impact to the operating insurance entities under Prosperity Life Group.