//BestWire// - AM Best has removed from under review with developing implications and upgraded the Financial Strength Rating to A- (Excellent) from B++ (Good) and the Long-Term Issuer Credit Rating to "a-" (Excellent) from "bbb+" (Good) of Merit Life Insurance Co. (Merit) (Charlotte, NC). The outlook assigned to these Credit Ratings (ratings) is stable.

The ratings reflect Merit's balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.

The rating upgrades reflect an upward revision of Merit's balance sheet strength assessment to the very strong level from strong, driven by the increase in Merit's risk-adjusted capitalization, as measured by Best's Capital Adequacy Ratio (BCAR), resulting from a significant increase in statutory surplus. The increase in surplus follows a recent acquisition and capital injection from the company's new parent, Knighthead Holdings Ltd. (Knighthead).

The ratings also reflect significant and explicit parental support and reinsurance protection from its affiliates. In turn, Merit provides Knighthead with access to the U.S. retail market. Under the new ownership, Merit is poised to expand its product offerings and enter the U.S. market with the introduction of multi-year guaranteed annuity products. AM Best will continue to monitor the company's operating performance and its impact on the strengthened balance sheet closely.