AM Best Places Credit Ratings of SILAC Insurance Company Under Review With Developing Implications
- December 29, 2021 04:50 PM (EST)
Oldwick //BestWire// - AM Best has placed under review with developing implications the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” (Good) of SILAC Insurance Company (SILAC) (Salt Lake City, UT).
SILAC has been placed under review with developing implications as the company’s risk-adjusted capital, as measured by Best’s Capital Adequacy Ratio (BCAR), has declined to an assessed level of weak as of year-end 2020. The company’s capital was strained significantly by rapid top-line growth and an increase in below investment grade bonds in its general account investment portfolio. However, during 2021, SILAC reduced its allocation to below investment grade bonds.
SILAC has taken steps to counter the weak BCAR assessment with the receipt of a $40 million capital contribution during fourth-quarter 2021 from its parent company, SILAC, Inc., and a commitment on a $60 million surplus note to be closed in early January 2022. Additionally, SILAC has committed to increasing the internal management target of the company’s risk based capital to 600% authorized control level (ACL) (300% company action level [CAL]) from 400% ACL (200% CAL). AM Best acknowledges that SILAC has recorded favorable earnings over the past year, which has contributed positively to SILAC’s capital position. However, the company’s relatively high level of financial and reinsurance leverage somewhat diminishes the overall quality of capital for the organization, and interest expense may put some pressure on earnings over the near to medium term.
The ratings will remain under review until AM Best can fully assess the company’s capital plans, including its ability to secure additional capital and manage top-line growth to maintain an acceptable level of risk-adjusted capitalization, as measured by BCAR, for its current ratings.
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 use of Best’s Credit Ratings, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
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 London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.