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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - MAY 18, 2010 12:00 AM (EDT)
A.M. Best Co. has upgraded the financial strength rating to A (Excellent) from A- (Excellent) and issuer credit ratings to "a" from "a-" of Pan-American Life Insurance Company (PALIC) and its affiliates, Pan-American Assurance Company and INRECO International Reinsurance Company (Cayman Islands). PALIC is the lead member of Pan-American Life Group, which is ultimately owned by Pan-American Life Mutual Holding Company. The outlook for these ratings has been revised to stable from positive. All companies are domiciled in New Orleans, LA, except where specified.
The rating actions reflect PALIC's strong risk-adjusted capitalization, its steadily increasing operating GAAP profitability and niche markets in the Latin American marketplace. The ratings also recognize the continuing execution of new business initiatives to drive premium diversity within the group through its various affiliates in Latin America, which is not reflected in the reported statutory results of PALIC.
PALIC continues to report favorable capitalization measures, despite recent declines in reported surplus due to dividending of earnings and ownership of certain affiliates to the holding company and the level of future credit risk and impairment in its investment portfolio is viewed as manageable. Although, profitable results have been recorded in both its Latin American and U.S. individual life operations on a consolidated basis, statutory operating results have been mixed for the U.S. life insurance companies. A.M. Best anticipates that PALIC and its affiliates will continue to expand in the Latin American market on a profitable basis, building on its long established presence and name recognition in this historic niche.
Partially offsetting these factors are PALIC's losses in parts of its group health segment. Losses have been recorded in its worksite health segment, with poor experience in certain large group accounts, as well as its Medicare business in Puerto Rico, which is recorded in a new operating subsidiary. A.M. Best anticipates that the company's worksite segment will likely continue to generate operating losses as it builds scale in the domestic Hispanic market. These challenges, as well as a number of non-recurring items, have led to inconsistent statutory results over the past five years. However, recent pricing actions and further consolidation in the group health business are anticipated to improve PALIC's results going forward.
For Best's Credit Ratings, an overview of the rating process and rating methodologies, please visit Best's Ratings & Analysis.
The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at Best's Credit Rating Methodology.
Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers.