A.M. BEST ISSUES RATINGS TO 115 LIFE/HEALTH INSURERS IN FINAL WEEKLY RELEASE
OLDWICK, N.J., July 12 /PRNewswire/ -- The A.M. Best Company today released the 15th and final edition of its 1993 Best's Rating Monitor for the life/health industry. Best's Ratings were assigned to 115 life/health insurers, including Connecticut Mutual Life Insurance Company, Keyport Life Insurance Company, Penn Mutual Life Insurance Company and Prudential Insurance Company of America. The annual and first-quarter review of 1,372 life/health companies followed by the A.M. Best Company has been completed with the distribution of the Monitor. A wrap-up Monitor examining the distribution of Best's Ratings among the life/health industry, rating issues and industry trends will soon follow. Last week's 14th edition concluded the annual and first-quarter review of 2,455 property/casualty companies. Rating rationales for 13 life/health companies are listed below: Connecticut Mutual Life Insurance Company, Hartford, Conn., was assigned a 1993 Best's Rating of "A+" (Superior). The company's superior financial strength was affirmed and its rating level of "A+" was unchanged. "This rating reflects the company's heightened profitability in recent years, favorable liquidity and good capitalization. It also acknowledges the company's well-managed distribution system and the strong position and growth that has been achieved in the individual life marketplace," said Larry G. Mayewski, senior vice president of Best's life/health division. Partially offsetting these strengths is the continued weakened performance of the company's mortgage investments, and the sustained losses experienced in its guaranteed investment contract (GIC) and group disability income lines of business. However, "A.M. Best views favorably the company's strategies to reduce its GIC liabilities and prudently manage its real estate-related exposures," he added. Connecticut Mutual Life has been successful over the past three years in its renewed efforts to focus its activities on individual life insurance sales where it principally targets upper-income individuals and small business owners. This follows the company's concentration throughout much of the 1980s on expanding its presence in the GIC arena. In addition, the company has maintained a smaller presence in the group life and disability income segments through its subsidiary, GroupAmerica Insurance Company. The company maintains a sizable exposure to commercial mortgage investments. At year-end 1992, underperforming loans (including restructures) accounted for 5.1 percent of general account assets. However, A.M. Best believes that Connecticut Mutual Life maintains a favorable liquidity position, which is enhanced by its strong investment management capabilities. The company's asset portfolio is supported by approximately $4.7 billion in investment-grade bonds, cash and short-term obligations (51 percent of invested assets). The company ranks among the 30 largest life/health insurers in the U.S. when measured by total assets. Due to its strategic role as a marketing arm of Connecticut Mutual Life Insurance Company, C.M. Life Insurance Company, Hartford, was assigned a 1993 Best's Rating of "A+" (Superior). This rating is based on the consolidated performance of the parent and this subsidiary. C.M. Life Insurance Company primarily markets universal life and single premium deferred annuity products. In addition, GroupAmerica Insurance Company, East Hartford, was assigned a 1993 Best's Rating of "A+" (Superior). This rating is based on the consolidated performance of the parent and this subsidiary, and reflects the implicit and explicit support that is received from Connecticut Mutual Life. GroupAmerica concentrates its activities on the sale of group life and disability income coverages. Although the company has experienced losses as a result of adverse claims experience and reserve strengthening actions on its group disability income product line, it is expected that recently implemented pricing, reserving and claims management actions will return the company to a profitable operating basis during 1993. First Colony Life Insurance Company, Lynchburg, Va., was assigned a 1993 Best's Rating of "A++" (Superior). The company's superior financial strength was affirmed and its rating level of "A++" was unchanged. "The rating reflects the company's conservative operating strategy, its high-quality investment portfolio, strong earnings performance, excellent liquidity position and sound capitalization," noted Larry G. Mayewski, senior vice president of Best's life/health division. The rating also acknowledges the prominent position of First Colony in the single premium immediate annuity (structured settlement) marketplace, its well-balanced business risk profile, and the strong relationship maintained between the company and its large and diversified distribution network. Partially offsetting these strengths is the considerable growth of the company over the past five years, and the corresponding increase in the company's leverage position. During 1992, Ethyl Corporation sold a 20 percent interest in the company through an initial public offering of First Colony Corporation, First Colony Life's parent company. The remaining shares of the company were spun off to Ethyl stockholders in July 1993. In connection with the sale, First Colony Corporation incurred long-term debt of $250 million. The corporation is currently reorganizing its original capital structure through the issuance of preferred stock, with the remaining portion to be refinanced with a long-term debt instrument. Going forward, First Colony Life will be challenged to maintain its current favorable capitalization due to expected growth and the level of stockholder dividends required by its parent company to service outstanding debt obligations. First Colony concentrates its sales activities in the writing of ordinary life, single and flexible premium deferred annuities and structured settlement contracts. A.M. Best views these lines of business to be complementary as changes in interest rates tend to shift profitability between business segments, thereby insulating overall earnings performance. Consistently favorable operating results from its individual life segment, combined with the significantly improved earnings performance of its annuity operations in recent years, has enabled First Colony to generate operating gains in excess of $224.9 million since year-end 1987. This profitability has resulted in considerable increases to the company's total capitalization (surplus funds and asset valuation reserves) over the past five years, despite the payment of $106.7 million in stockholder dividends over this period of time. At year end, the company's excellent liquidity position was supported by its sizable annual cash flow and investment-grade bonds, short-term securities and cash balances of approximately $4.8 billion (83 percent of invested assets). As a strategic subsidiary of First Colony Life Insurance Company, American Mayflower Life Insurance Company of New York, New York, was assigned a 1993 Best's Rating of "A+" (Superior). The company's superior financial strength was affirmed and its rating level of "A+" was unchanged. This rating reflects the overall operating profile and financial position of the company and that of its parent. Although licensed in numerous states, American Mayflower primarily operates as the New York marketing arm of First Colony Life. Great American Life Insurance Company, Cincinnati, was assigned a 1993 Best's Rating of "A" (Excellent). The company's financial strength rating was downgraded from "Superior" to "Excellent" and its rating level was lowered from "A+" to "A". The rating reflects the company's improving profitability, strong liquidity and favorable risk-adjusted capitalization, and acknowledges the stable structure of the company's liabilities and its strong presence in the individual tax-deferred annuity market. Partially offsetting these strengths is Great American Life's concentrated operational focus which exposes it to an above-average level of interest rate risk, the relatively high degree of debt carried at the parent level and its inconsistent sales results. In addition, "A.M. Best remains somewhat concerned with the vast majority of its individual annuity reserves that are two-tiered product designs, which have become subject to considerable regulatory and consumerist scrutiny with regard to reserving and marketing practices," according to Larry G. Mayewski, senior vice president of Best's life/health division. Two-tiered annuity products credit differing credited interest rates and surrender values to policyholders that are based on the policyholder's persistency, and have accounted for the overwhelming majority of business written prior to 1993. Great American Life Insurance Company has focused its attention on the sales of retirement annuity products for employees of not-for-profit institutions. The company has been most successful in sustaining a strong market presence in the public education market where it principally targets its sales to teachers in the primary and secondary levels. The company has reported improved earnings over the past two years which is attributable to the favorable investment spread that has been generated and both the good contractholder persistency that results from its product design and the generally stable nature of its clientele. However, "A.M. Best believes that the company will be challenged to maintain its recent levels of earnings and its position within a highly competitive marketplace, given the potential for mandated revisions concerning two-tiered annuity reserving requirements and its new emphasis (during 1993) on single-tiered products," Mr. Mayewski noted. The company has experienced a downturn in sales volume over the past two years which is partially attributable to recessionary economic conditions and a lower interest-rate environment. However, despite the shift from two-tiered to single-tiered products, the company has reported an increase in new sales rates during the first six months of 1993. Great American Life Insurance Company has considerably improved its risk-adjusted capitalization in recent years, reflecting its concentrated efforts to improve its balance sheet quality, its favorable earnings performance and contributions received from its ultimate parent concern, American Financial Corp. This trend has been continued through the first half of 1993, as further enhancements to balance-sheet quality, along with a contribution from its new intermediate parent holding company, have favorably influenced the company's risk-adjusted capital position. However, A.M. Best remains concerned with the company's overall financial flexibility due to increased debt levels which arose from the leveraged spin-out of the company at the close of 1992 from American Financial Corp., through a newly formed holding company, American Annuity Group, Inc. The company maintains a high-quality asset portfolio that is supported by nearly $3.7 billion of investment-grade bonds, cash and short-term obligations (84 percent of invested assets). Although Great American Life's bond portfolio
includes a relatively high concentration of mortgage-backed securities, which present some degree of sensitivity to changes in interest rates, A.M. Best believes that the large portion of shorter term planned amortization class (PACs) securities and its focus on asset/liability management mitigate the impact of interest-rate risk in this area. Great American ranks among the 75 largest life/health insurers in the U.S. when measured by total assets.
Great-West Life Assurance Company, Winnipeg, Manitoba, was assigned a 1993 Best's Rating of "A++" (Superior). The company's superior financial strength was affirmed and its rating level of "A++" was unchanged. Concurrently, the "Superior" rating level of the company's subsidiary, Great-West Life & Annuity Insurance Company, Englewood, Colo., was raised to "A++" from "A+." These ratings reflect Great-West Life Assurance Company's (GWL) diversified sources of earnings in both Canada and the United States, the companies' strong market positions, high-quality bond portfolios, excellent consolidated capitalization and the support and strength of the majority owner, Power Financial Corporation of Canada. GWL's operations are broadly diversified with prominent positions being maintained in Canada, and in the United States through a wholly owned subsidiary, Great-West Life & Annuity Insurance Company (GWLA). GWL is a leading company in the Canadian group life and health market, where it maintains a 12 percent market share, while in the United States, GWLA is a premier player in a number of pension and group health markets. The group pension segment is focused in the 457, 403(b) and 401(k) pension markets, where the company's strengths include its full- service capabilities and its strong asset/liability management skills. Although, GWLA has a high concentration of business in the group medical line, "A.M. Best believes that the company is strongly entrenched in its markets through a unique marketing approach integrating self-insured medical plans and 401(k) programs," said Larry G. Mayewski, senior vice president of Best's life/health division. Contributing to GWLA's success in the United States group market is its strong administrative capabilities for ASO business, as well as the company's membership in Private Healthcare Systems (PHCS). PHCS, a managed healthcare organization founded by GWLA, provides GWLA with access to managed care options, thus enabling GWLA to be competitive with other major group health insurers, HMOs and other medical care providers. Consolidated capitalization remains excellent and is anticipated to be maintained at sound levels through both internal capital generation and through external capital raising efforts. GWL and GWLA also have the potential for additional capital contributions from The Power Group of Companies. Although internal capital growth has been pressured through the aggressive measures taken by management to conservatively value the commercial mortgage portfolios in both Canada and in the United States, A.M. Best believes that these measures have reduced the loss potential from the consolidated mortgage and real estate investments. Nevertheless, the continued exposure to the real estate markets will likely continue to have a dampening effect on earnings due to the companies' exposures to the California, Quebec and Ontario real estate markets. However, the rating anticipates that the overall strength of the company's core earnings will enable 1993 consolidated income to be above the C$114 million profit reported, before special charges, in 1992. John Alden Life Insurance Company, St Louis Park, Minn., was assigned a 1993 Best's Rating of "A+" (Superior). The company's superior financial strength was affirmed and its rating level of "A+" was unchanged. "The rating reflects the company's conservative operating strategy, its strengthened earnings performance in recent years, its high-quality investment portfolio, and excellent liquidity position," said Larry G. Mayewski, senior vice president of Best's life/health division. The rating also acknowledges the strong annuity growth and the prominent position John Alden Life maintains in the small group accident and health marketplace. In addition, this rating reflects the company's improved capitalization and the enhanced financial flexibility of its ultimate parent company, John Alden Financial Corporation, during the year. The improvement in its parent company's financial position was achieved through a successful initial public offering of its common stock during 1992, of which a portion of the net proceeds
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|Date:||Jul 12, 1993|
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