OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has affirmed the financial strength rating (FSR) of B++ (Good) and the issuer credit rating (ICR) of “bbb” of Trans World Assurance Company (TWA) (San Mateo, CA). The outlook for both ratings remains stable.
The ratings affirmation reflects TWA’s strong risk-adjusted capitalization, overall positive statutory net earnings in recent years, growth in capital and a high credit quality fixed income portfolio with minimal below investment grade bond exposure and favorable liquidity ratios.
Partially offsetting rating factors are ongoing regulatory obstacles that are negatively impacting the marketing of the company’s products on military bases, which has contributed to declining premium trends in recent years and a diminished business profile. Operating earnings continue to be pressured by low interest rates and generous policyholder crediting rates. Despite the lower levels of new business strain and recent shifts in the investment portfolio to improve the portfolio yield, A.M. Best believes that earnings will continue to be pressured. TWA’s operating profile is highly interest rate sensitive and at risk of spread compression in the low interest rate environment given very high minimum guaranteed crediting rates on the majority of its annuity and side-fund deposits. Additionally, the investment portfolio holds a material allocation to affiliated holdings (mortgage loans and real estate) that are geographically concentrated and partially offset the company’s generally good liquidity profile.
Key rating factors that could result in a positive rating action include several years of sustained growth in premium levels and inforce business metrics, increasing spreads between interest earned on investments and interest credited to policyholders and improved cash flow testing/asset adequacy results. Key rating factors that could result in a negative rating action include a continued decline in premiums written, decreases in risk-adjusted capitalization, unfavorable performance within the mortgage portfolio causing material realized losses and a decline in cash flow testing/asset adequacy results.
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.
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