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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - JULY 12, 2011 12:00 AM (EDT)
A.M. Best Co. has upgraded the financial strength rating to B++ (Good) from B+ (Good) and the issuer credit rating to "bbb" from "bbb-" of The Union Labor Life Insurance Company (Union Labor Life). The outlook for both ratings is stable. Union Labor Life is a subsidiary of Ullico Inc. (both headquartered in District of Columbia), which is a multi-line holding company offering insurance and financial products and services, whose common stock is held by various labor organizations and their related benefit funds.
The rating actions primarily reflect Union Labor Life's strong risk-adjusted capitalization, favorable operating results in recent periods and its established niche in the Taft-Hartley market. Union Labor Life and Ullico Inc. have enjoyed improved operational efficiencies and balance sheet quality over the past few years. In addition, as a result of Union Labor Life's conservative investment posture, the company has experienced only modest capital losses in its investment portfolio despite the recent turmoil in the financial markets. As a result, the company's risk-adjusted capital position remains solid despite $45 million in stockholder dividends over the past three years.
Although earnings have been impacted by a decline in separate account asset values in recent periods, this has largely been offset by favorable loss ratios and good persistency in the company's core group life and medical stop loss product lines. While direct premiums have increased over the most recent period, A.M .Best notes that this premium growth has primarily been driven by medical stop loss sales, which has historically been cyclical in nature and remains susceptible to government regulation. In addition, Union Labor Life's Separate Account J, which primarily invests in commercial mortgages used to finance projects built by union labor, has experienced an increase in delinquencies and declining property values in recent periods, which have resulted in diminished returns over the past two years. Also, Union Labor Life had temporarily suspended current withdrawal requests by group annuity contract holders in order to meet its funding requirements, but has recently opened the queue for withdrawals. A.M. Best believes that while the company's separate account business has historically contributed strong returns and outperformed benchmarks, it may be challenged to maintain these historical rates of return over the near term due to the current economic environment.
The principal methodology used in determining these ratings is Best's Credit Rating Methodology - Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best's rating process and highlights the different rating criteria employed. Additional key criteria utilized include: "Risk Management and the Rating Process for Insurance Companies"; "Understanding BCAR for Life and Health Insurers"; "Rating Members of Insurance Groups"; and "A.M. Best's Liquidity Model for U.S. Life Insurers." Methodologies 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.