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FOR IMMEDIATE RELEASE
OLDWICK - MAY 16, 2016 09:53 AM (EDT)
A.M. Best has assigned a financial strength rating of B (Fair) and an issuer credit rating of “bb” to StateTrust Life and Annuities, Limited (STL) (Tortolla, British Virgin Islands). The outlook assigned to each rating is stable.
The rating assignments for STL reflect the company’s relatively modest level of absolute capital, the above-average investment risk within its general account portfolio, its inconsistent profitability trend and the risks to its business profile from unanticipated changes to international tax law and investment treaties. The ratings also reflect the fact that the company’s enterprise risk management and corporate governance practices are still in their developmental stages. Additionally, the majority of the company’s business production is sourced from clients residing in Latin American countries that pose a unique set of risks, including higher political, capital markets and regulatory risk related to economies that are unpredictable. Finally, STL’s ongoing expansion into local operations in other Latin American countries will require additional capital. However, A.M. Best acknowledges the company’s previous successful share offerings.
These negative rating factors are partially offset by STL’s niche business profile as a provider of life insurance products, retirement and education plans to clients mainly located throughout Latin America, where medium to high net worth individuals desire products denominated in U.S. dollar, Euro and other currencies. STL offers complementary financial solutions to the existing services (such as banking and investments) offered by the StateTrust group of companies to clients located in the United States and throughout Latin American countries. A.M. Best notes that STL’s product risk is heavily mitigated by the fact that most of the investment risk is borne by its customers through the use of variable life and annuity product designs that offer no secondary guarantees, and that the vast majority of mortality risk is reinsured by a highly rated reinsurer. The ratings also recognize STL’s adequate level of risk-adjusted capitalization, which is further supported by its long-standing partnership with a creditworthy reinsurer.
Positive rating movement for STL would be possible should the company realize a material improvement in risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), while also implementing further improvements to its enterprise risk management framework. A negative rating action could result from a significant decline in risk-adjusted capitalization, as measured by BCAR. A negative rating action could also result from further net losses resulting in a decline in absolute capital.
This press release relates to rating(s) that have been published on A.M. 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 A.M. Best’s Recent Rating Activity web page.
A.M. Best is the world’s oldest and most authoritative insurance rating and information source.