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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - NOVEMBER 20, 2013 12:00 AM (EST)
A.M. Best Co. has removed from under review with developing implications and affirmed the financial strength rating of B (Fair) and issuer credit rating of “bb+” of Equitable Life & Casualty Insurance Company (Equitable Life & Casualty) (Salt Lake City, UT). The outlook assigned to both ratings is stable.
The ratings for Equitable Life & Casualty were previously placed under review with developing implications following A.M. Best’s discussions with the company’s new management team and based on disclosures in its first-quarter 2013 statutory filing that indicated Chris McDaniel was appointed president and that majority shareholder, E. Rod Ross, entered into an agreement to sell his shares of the company to Mr. McDaniel. However, in November 2013, the sales agreement was withdrawn.
The rating affirmations reflect Equitable Life & Casualty’s current negotiation of a reinsurance transaction to bolster its relatively modest risk-adjusted capital position. Through September 2013, the company reported a $1.7 million net loss as well as an associated deterioration in its absolute and risk-adjusted capital levels due in part to the strengthening of its long-term care reserves.
The rating affirmations also reflect business improvement actions implemented in 2013 by Equitable Life’s new management team. These actions include managing the challenging closed long-term care block via multiple initiatives; entering new reinsurance treaties, which reinsure the vast majority of the company’s Medicare supplement and final expense businesses; reducing expenses; and generating new sources of non-risk administrative revenue.
Although the outlook on Equitable Life & Casualty’s ratings is stable, negative rating actions could occur if the reinsurance transaction, which is currently under negotiation, does not materialize and result in improved capitalization. Alternatively, positive rating actions could occur if the company significantly grows its risk-adjusted capital and surplus level while increasing profitability and successfully managing its run-off long-term care business.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source.