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Best’s News & Research Service - March 08, 2022 11:26 AM (EST)

AM Best Revises Outlooks to Positive for Trustmark Group, Inc. and Its Subsidiaries

  • March 08, 2022 11:26 AM (EST)
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Oldwick //BestWire// - AM Best has revised the outlooks to positive from stable and affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a-” (Excellent) of Trustmark Insurance Company (Lake Forest, IL) and Trustmark Life Insurance Company of New York (Albany, NY) (collectively referred to as Trustmark Group), as well as Trustmark Life Insurance Company (Lake Forest, IL). Concurrently, AM Best also has revised the outlook to positive from stable and affirmed the Long-Term ICR of “bbb-” (Good) of Trustmark Group, Inc. (TGI) (Lake Forest, IL), and the Long-Term Issue Credit Rating of “bb” (Fair) on the $75 million floating rate trust preferred securities ($39 million outstanding), due 2035, issued by Trustmark Finance Trust I.

These Credit Ratings (ratings) reflect Trustmark Group’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).

The positive outlooks reflect Trustmark Group maintaining the strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), as well as its continued trend of moderating investment risks. Trustmark Group has shown incremental strengthening of its risk-adjusted capitalization over the past few years, primarily driven by strong operating results. Trustmark Group actively manages its statutory capital ensuring appropriate levels are maintained within each insurance entity and that any current and future capital needs are deployed by the holding company, as needed.

Trustmark Group maintains a conservative investment portfolio comprised of high-quality fixed income securities; however, the portfolio contains an elevated amount of higher-risk assets allocated to mortgage loans and equities. During 2021, Trustmark Group has taken steps to decrease its high-risk exposure by reducing the portfolio allocation of equities and mitigating some of its asset risk. Operating performance remains supported by continued operating profitability across most of its core set of products and businesses. After a couple of years of stagnant top line growth, the company reported very favorable premium development following a recent strategic growth opportunity in the Washington state market. Furthermore, the organization maintains an established national marketing niche, primarily among midsized employer groups offering voluntary worksite benefits. However, AM Best also notes that the Trustmark Group operates in the highly competitive voluntary benefits market, which includes many national and regional insurers. Additionally, the group remains somewhat exposed to geographic concentration risk, with more than half of its business generated in five states.

The ratings of Trustmark Life Insurance Company’s (Trustmark Life) reflect its balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate ERM.

The revision of the outlook to positive reflects AM Best’s expectation that Trustmark Life will maintain its balance sheet strength, supported by risk-adjusted capitalization at the strongest level, as well as its continued strategic importance to the Trustmark organization. Trustmark Life’s management is focused on the small-group, self-funded medical market in which it sells medical stop-loss coverage and competes with carriers increasingly seeking new business in this space. Trustmark Life also has maintained the strongest level of risk-adjusted capitalization, as measured by the BCAR. The company’s capital level declined slightly during 2021 due to lower net income and dividend payments to the parent holding company. Trustmark Life’s top line has fluctuated over the past three years as the company remains pressured by competition in the very crowded stop-loss market, which is the majority of its business. However, Trustmark Life remains focused on consistent operating returns, which have been favorable but declining over the past several years.

TGI’s business diversity reflects the wide breadth of its operating subsidiaries’ voluntary life, supplemental health and small-group, self-funded insurance products, as well its non-insurance administrative, wellness and fitness management services. The non-insurance entities also provide the organization with additional financial flexibility through its non-regulated earnings operations, which contributed favorably to TGI’s earnings in 2021 after a few years of losses. Financial leverage has remained manageable over the past few years, and AM Best observed a decline in 2021 to approximately 2.9% from 4.9% in 2019. The organization’s earnings before interest and taxes (EBIT) interest coverage is strong at over 12 times, based on solid earnings from operations.

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 Performance Assessments, 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.



Health Insurers Financial Strength Press Release A.M. Best Rating Services, Inc. Insurance Issue Credit Rating Best's Credit Rating Action Issuer Credit Rating Subsidiaries


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