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FOR IMMEDIATE RELEASE
OLDWICK - SEPTEMBER 19, 2018 01:48 PM (EDT)
A.M. Best has downgraded the Long-Term Issuer Credit Rating (Long-Term ICR) to “a” from “a+” and affirmed the Financial Strength Rating (FSR) of A (Excellent) of The Savings Bank Mutual Life Insurance Company of Massachusetts (SBLI) (Woburn, MA). The outlook of the Long-Term ICR has been revised to stable from negative, while the outlook of the FSR remains stable.
The ratings reflect SBLI’s very strong balance sheet assessment as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
The downgrade reflects A.M. Best’s view of the modest quality of SBLI’s capital and its limited financial flexibility as reinsurance captive solutions are heavily utilized for new business growth. In addition, SBLI’s issuance of a surplus note in 2017, which was used to fund its re-mutualization in conjunction with buying out its private bank shareholders, represented 37.5% of the company’s ownership and is also placing pressure on the balance sheet. While A.M. Best believes the servicing of this surplus note in the short run will negatively affect capital relative to prior shareholder dividends paid, the cleaner ownership structure coupled with capping and stabilizing future servicing costs to providers of capital are potential long-run positives.
Partially offsetting rating factors include an investment portfolio of good credit quality with modest overall exposure to below investment grade bonds, real estate, schedule BA assets, equities and mortgage loans relative to capital. Additionally, SBLI utilizes high quality reinsurance counterparties. While risk-adjusted capitalization is projected to decline until SBLI Re is fully written down, A.M. Best expects that SBLI’s BCAR ratios should remain very strong. A.M. Best views SBLI’s operating performance as adequate as it is supported by good mortality experience, moderate premium growth and favorable persistency.
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 Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.
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