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FOR IMMEDIATE RELEASE
OLDWICK - JANUARY 24, 2019 11:55 AM (EST)
AM Best has revised the outlook to stable from negative for the Long-Term Issuer Credit Rating (Long-Term ICR) and affirmed the Financial Strength Rating (FSR) of B++ (Good) and the Long-Term ICR of “bbb+” of Trans-Oceanic Life Insurance Company (TOLIC) (San Juan, PR). The outlook of the FSR remains stable.
The ratings reflect TOLIC’s balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).
TOLIC’s continues to grow capital and this favorable trend has been due to the consistency of earnings over the long term. However, the scale of the operating company’s balance sheet has fluctuated, mainly because of unrealized losses, increases in reserves and the distribution of stockholders’ dividends. In addition, TOLIC’s revenue development was flat for the last five years. In 2017, the company reported a sharp increase in underwriting performance, but the results remained below the five-year trend. The improvement was mainly the result of substantially lower benefit claims, surrenders and general expenses, as compared with the prior year. In 2018, underwriting performance continued a gradual but noticeable improving trend, and premium retention rates were high; however, revenue development remained flat.
TOLIC’s current operating priorities include diversification in territories and products, which is expected to significantly enlarge its geographic footprint. Starting in Florida, TOLIC is pursuing a business expansion strategy in the continental United States. The company plans to operate mainly in the Hispanic market initially, offering a competitive suite of accident and health products similar to the ones it offers in Puerto Rico. More recently, TOLIC has made definitive steps to rejuvenate the annuity line of business in partnership with a major new player in the region. This would help TOLIC increase market share and effectively broaden its business mix.
Over the last two years, TOLIC has reduced default risk on Puerto Rico-related investments. However, the company’s ERM program is still evolving, but it has progressed favorably and AM Best considered it to be appropriate. While the company maintains sufficient liquidity and capital to mitigate any delays in revenue collection, the company has had to manage its operations through successive tail-risk scenarios over a long period and is beginning to incorporate risk-mitigating strategies into its ERM apparatus. These strategies include the adoption of preventative and well-informed tactics based on research, and precautionary actions as a result of risk identification and setting risk tolerances, specifically to infuse risk management awareness into the company culture.
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