CONTACTS:
FOR IMMEDIATE RELEASE
OLDWICK, N.J. - JUNE 19, 2012 12:00 AM (EDT)
A.M. Best Co. has upgraded the FSR to B+ (Good) from C++ (Marginal) and ICR to “bbb-” from “b” of Multinational Life Insurance Company (MLIFE) (Hato Rey, Puerto Rico). The ratings have been removed from under review with negative implications and assigned a stable outlook.
Concurrently, A.M. Best has assigned an FSR of B++ (Good) and an ICR of “bbb+” to Multinational Insurance Company (MIC) (Hato Rey, Puerto Rico). The outlook assigned to both ratings is stable.
The rating actions of MLIFE reflect the recent major change in its ownership structure, and subsequently, financial and managerial support and commitment from MLIFE’s new parent company, Multinational Insurance Company, a wholly owned subsidiary of Aseguradora Ancon SA, an insurer domiciled in Panama. Following a capital infusion from the new owner in the form of preferred stock, MLIFE’s capitalization has increased to adequate levels. A number of management initiatives has been put into place, including meaningful cost savings, which have resulted in positive operating results thus far in 2012. A.M. Best believes the company will continue to generate positive operating earnings, which are expected to be retained in support of the current rating.
Partially offsetting these strengths include a history of unprofitable results, declining premium trends and challenges associated with rebuilding a brand and generating sustained profitable premium growth in MLIFE’s core Puerto Rico marketplace.
The ratings of MIC reflect its adequate initial capitalization and liquid position, strong reinsurance program and explicit parental support.
Also inuring to MIC’s ratings is a sound business plan, upon which the profitability and liquidity measures of the ratings are based. The ratings are supported by an amount of capital that meets A.M. Best’s current and prospective requirements for newly formed companies as measured by Best’s Capital Adequacy Ratio (BCAR).
These strengths are partially offset by execution risk due to the unproven startup nature of MIC and its geographic concentration, which subjects it to regulatory, economic and event risk.
Key drivers that could lead to a positive outlook or a ratings upgrade for the companies are stable underwriting performance and reduced overall net exposure.
Factors that could lead to a negative outlook or a ratings downgrade are material loss of capital from either claims due to a large catastrophic event, a reduced level of capital that does not support the ratings or an increase in net retention. The ratings are tied to A.M. Best's internal assessment of Aseguradora Ancon, S.A.; therefore, unfavorable operating performance or material loss of capital could result in changes to the ratings.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Key criteria utilized include: “Risk Management and the Rating Process for Insurance Companies”; “Understanding BCAR for Property/Casualty Insurers”; “Rating New Company Formations”; “Catastrophe Analysis in A.M. Best Ratings”; and “Rating Members of Insurance Groups.” Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.