Best’s News & Research Service - June 25, 2020 02:02 PM (EDT)
AM Best Maintains Under Review With Negative Implications Status for Universal Life Insurance Co Following Arbitration Award
- June 25, 2020 02:02 PM (EDT)
Oldwick //BestWire// - AM Best has maintained the under review with negative implications status for the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” of Universal Life Insurance Company (San Juan, PR) (Universal Life) following a reinsurance arbitration award.
This Credit Rating (rating) action reflects a continuation of the under review with negative implications status that was assigned on April 15, 2020, and was predicated on Universal Life raising capital to provide ample liquidity for its fixed-annuity business currently reinsured by Private Bankers Life & Annuity Co., Ltd. (PBLA).
This under review status is based on the elevated counterparty risk attributed to the fixed-annuity assets maintained and held in trust by PBLA, a Bermuda-domiciled company with direct ties to Greg E. Lindberg, who was convicted of wire fraud and bribery charges by a U.S. federal jury in March 2020.
Universal Life was awarded a $524 million reinsurance arbitration award on June 2, 2020, with the arbitration panel ordering PBLA to fund fully a segregated trust account with cash for the sole benefit of Universal Life. However, the account has not been funded and Universal Life’s litigation team has filed a lawsuit demanding that Lindberg uphold the contractual guarantee of the trust. The arbitration award is certainly a favorable development; however, AM Best remains concerned about the timing of the funding of the segregated trust account.
The ratings will remain under review until PBLA funds the segregated account with cash as per the amount in the arbitration award in conjunction with Universal Life executing its own recapture of the PBLA trust funds and engaging with a new reinsurance partner for its inforce fixed-annuity business; or Universal Group, Inc. completes the capital raise and provides additional support to Universal Life as per the previously disclosed capital raise.
AM Best will continue to have ongoing discussions with Universal Life’s management team for updates on both the funding of the segregated account and the capital raise, which we expect resolution on by the end of the third quarter 2020.
These ratings reflect Universal Life’s balance sheet strength, which AM Best categorizes as adequate, as well as its strong operating performance, limited business profile and marginal enterprise risk management.
This press release relates to Credit Ratings that have been published on AM 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.