OLDWICK: AM Best has upgraded the Long-Term Issuer Credit Rating (Long-Term ICR) to “bbb+” from “bbb” and affirmed the Financial Strength Rating of B++ (Good) of Puerto Rico based Multinational Life Insurance Company (MLIFE). The outlook of these Credit Ratings is stable.
The ratings reflect MLIFE’s balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, very limited business profile and appropriate enterprise risk management (ERM).
The company has made consistent improvements in capital growth as it has accreted positive earnings and adjustments to contributions made to capital and surplus. The company’s balance sheet strength improved as it strengthened reserves and made prudent changes in its investment mix while preserving the quality of publicly traded invested assets.
Operating results have been favorable over the last five years, although income results generally trended downward and have fluctuated in consecutive years. Given the limited scale of the company’s operations, underwriting results fluctuated broadly but generally in a declining trend.
MLIFE uses ceded reinsurance agreements to bring consistency to top line risk exposure and consistent investment income to mitigate operating losses.
From a business profile perspective, the company has added new members to its senior management team and is following new strategic objectives. The company is making significant changes to its product portfolio and de-emphasizing certain lines of business while shoring up those products that it plans to take forward.
MLIFE’s application of ERM strategies is taking hold. The risk and compliance aspects of current operations are being managed through a standard risk evaluation process and the company is using the results to inform risk avoidance strategies.
Flexibility and innovation are core elements already in place, with AM Best’s expectation that business diversification efforts and the prudent use of reinsurance programs will help build MLIFE’s competitive stance and lower overall risk exposure.
Offsetting these strengths is the high geographic risk in Puerto Rico’s recovering but damaged economy. Emigration patterns have not reversed since the hurricane of two years ago and more recently the country has experienced a spate of earthquakes.