A.M. Best Downgrades Ratings of State Trust Life and Annuities Limited

OLDWICK, N.J.--()--A.M. Best has downgraded the financial strength rating to B (Fair) from B+ (Good) and the issuer credit rating to “bb” from “bbb-” of State Trust Life and Annuities Limited (STL) (Tortola, British Virgin Islands). The outlook for both ratings has been revised to negative from stable.

The downgrade reflects a significant increase in the risk appetite in STL’s general account investments, an associated material decline in risk-adjusted capitalization as measured by Best’s Capital Adequacy Ratio (BCAR) and an overall increase in the risk environment within the countries from which STL sources its business. Additionally, as part of its interactive rating process, A.M. Best assesses an insurer’s risk management capabilities within the context of the company’s scope of operations and the complexity of its business. In this regard, A.M. Best views STL’s risk management and control framework to be notably weaker relative to other life insurance companies, which potentially exposes the company’s balance sheet to an above average level of volatility. This view is evidenced by senior management actions that have at times resulted in significant changes in the characteristics of STL’s general account investments. These concerns are further magnified by a local regulatory regime that A.M. Best views to be less robust than the regulatory environment currently in place in the United States.

Partially offsetting these negative rating factors are the favorable risk characteristics of STL’s product portfolio and niche business profile. A.M. Best views positively the risk characteristics of the products offered by STL as there are no living benefit guarantees, the majority of policyholders bear the investment risks and a highly rated reinsurer assumes a majority of the mortality risk. A.M. Best also views positively STL’s role as a niche provider of life insurance products and 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. Additionally, STL has shown the ability to raise new capital when needed and it has begun to execute its strategy of further diversifying its client base through investments in local insurance companies in new jurisdictions.

Factors that could result in a revision of the rating outlook to stable from negative would include an improvement in risk-adjusted capitalization together with significant improvements in STL’s corporate governance and enterprise risk management framework. Factors that could result in a negative rating action include a further decline in risk-adjusted capitalization as measured by BCAR, further increases in investment risk, unfavorable trends in STL’s net operating performance or a regulatory enforcement action taken against STL or one of its affiliates.

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.

Key insurance criteria reports utilized:

  • Evaluating Country Risk
  • Risk Management and the Rating Process for Insurance Companies
  • Understanding Universal BCAR

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 visit A.M. Best’s Ratings & Criteria Center.

A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2015 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

Contacts

A.M. Best Company
Brian Spadaccino, CFA, (908) 439-2200, ext. 5803
Financial Analyst
brian.spadaccino@ambest.com
or
Tom Rosendale, (908) 439-2200, ext. 5201
Assistant Vice President
thomas.rosendale@ambest.com
or
Christopher Sharkey, (908) 439-2200, ext. 5159
Manager, Public Relations
christopher.sharkey@ambest.com
or
Jim Peavy, (908) 439-2200, ext. 5644
Assistant Vice President, Public Relations
james.peavy@ambest.com

Contacts

A.M. Best Company
Brian Spadaccino, CFA, (908) 439-2200, ext. 5803
Financial Analyst
brian.spadaccino@ambest.com
or
Tom Rosendale, (908) 439-2200, ext. 5201
Assistant Vice President
thomas.rosendale@ambest.com
or
Christopher Sharkey, (908) 439-2200, ext. 5159
Manager, Public Relations
christopher.sharkey@ambest.com
or
Jim Peavy, (908) 439-2200, ext. 5644
Assistant Vice President, Public Relations
james.peavy@ambest.com