OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has revised the outlook to positive from stable and affirmed the financial strength rating of B+ (Good) and the issuer credit rating of “bbb-” of Guarantee Trust Life Insurance Company (Guarantee Trust) (Glenview, IL). Guarantee Trust is a mutual company that provides a portfolio of health, accident, life and special risk insurance to individuals and families.
The revised outlook reflects Guarantee Trust’s favorable overall operating trends and good risk-adjusted capitalization, as well as improvements in its business profile and enhanced distribution opportunities. Over the past few years, the company has reported net operating gains driven primarily by favorable underwriting results as well as the divestiture of several unprofitable, non-core blocks of business. Guarantee Trust’s business profile has become increasingly focused on its core agency accident and health (A&H) business, which includes sales of hospital indemnity, cancer and accident products, and the management of inforce long-term care (LTC) business. The company exited the market for traditional LTC business in early 2013.
Guarantee Trust’s A&H business is the primary driver of revenue and operating earnings of the company, with its life and special risk businesses providing some diversification. Additionally, the company has benefited from enhanced distribution through the establishment of several new partnerships, specifically within its A&H segment. A.M. Best notes, however, that a material amount of A&H premiums are generated by a single distribution partnership.
Guarantee Trust’s relatively conservative investment portfolio has generated a steady stream of net investment income. The company’s holdings are primarily allocated to investment grade corporate bonds, with a recent uptick in private placements. Consistent with other insurers searching for additional yield, Guarantee Trust has also increased holdings in structured securities, which are managed by an outside consultant. Despite the added investment risk, A.M. Best believes the company’s risk-adjusted capitalization is sound. Moreover, Guarantee Trust’s absolute capital position has been augmented by good earnings and is of higher quality following the retirement of its outstanding surplus notes in 2010.
In the near to medium term, positive rating movement could occur if Guarantee Trust continues to report favorable trends in operating results and capitalization, including organic growth in its core accident and health lines. Key rating factors that could result in negative rating actions include deterioration in operating results and/or a significant decline in risk-adjusted capital.
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.
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