OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has affirmed the financial strength rating (FSR) of A (Excellent) and the issuer credit ratings (ICR) of “a” of Pan-American Life Insurance Company (New Orleans, LA), its wholly owned subsidiary, Pan-American Assurance Company (New Orleans, LA), and an affiliate INRECO International Reinsurance Company (Cayman Islands) – collectively referred to as the Pan-American Life Insurance Group (Pan-American Life). The outlook for these ratings remains stable. In addition, A.M. Best has revised the outlook to positive from stable and affirmed the FSR of A- (Excellent) and the ICR of “a-” of MTL Insurance Company (MTL) (Oak Brook, IL), as well as the issue rating of “bbb” on MTL’s $30 million 6.25% surplus notes, due March 2028.
The rating actions follow the merger between Pan-American Life Mutual Holding Company (PALMHC), the ultimate parent of Pan-American Life, and Mutual Trust Holding Company (MTHC), the ultimate parent of MTL. PALMHC is a mutual insurance holding company.
The revised outlook for MTL reflects the potential for rating enhancement as MTL is integrated into the operations of its affiliates under PALMHC. MTL will be a stand-alone subsidiary of Pan-American Life Insurance Group, Inc. (PALIG), an intermediate holding company, and is expected to be the functional focal point of the domestic life business of the consolidated entity. The merger is expected to revitalize PALIG’s U.S. domestic life segment and rebalance PALIG’s geographic diversification that in recent years has been more heavily weighted toward its non-U.S. businesses. A.M. Best expects the merger with MTHC to be immediately accretive to PALIG’s earnings.
The affirmation of Pan-American Life’s ratings reflect the benefits derived from the company’s long-established presence and name recognition in Latin America and the U.S. Hispanic marketplace, as well as its improved balance sheet and income statement. The ratings also reflect Pan-American Life’s solid consolidated risk-adjusted capitalization, well-performing fixed-income investment portfolio and positive net operating performance. Partially offsetting these strengths are the challenges to grow statutory capital, sustain and improve consolidated net operating performance and successfully execute its business plans throughout the enterprise. The ratings also reflect the economic, political, and financial system risks associated with the Latin American and Caribbean countries where Pan-American Life writes a significant amount of premium.
The affirmation of MTL’s ratings continues to reflect the company’s favorable stand-alone business profile focusing on traditional whole life, its positive, albeit fluctuating, trend of operating earnings, and its growth in absolute and risk-adjusted capitalization. The ratings also reflect the diversification and improved risk profile of MTL’s investment portfolio. Partial offsets to these positive rating factors include a declining trend of life sales, projected earnings compression and an operating profile that historically has been volatile over the five-year period.
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