OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has upgraded the Financial Strength Rating (FSR) to B+ (Good) from B (Fair) and the Long-Term Issuer Credit Ratings (Long-Term ICR) to “bbb-” from “bb+” of Nassau Life Insurance Company and PHL Variable Insurance Company, collectively known as Nassau Insurance Group. Concurrently, AM Best has upgraded the FSR to B+ (Good) from B (Fair) and the Long-Term ICRs to “bbb-” from “bb+” of Nassau Life and Annuity Company, Nassau Life Insurance Company of Kansas (Overland Park, KS) and Constitution Life Insurance Company (Houston, TX). In addition, AM Best has upgraded the Long-Term ICR to “b+” from “b” of The Nassau Companies of New York, Inc. (Nassau of NY) and upgraded its existing Long-Term Issue Credit Ratings (Long-Term IRs). The outlook of these Credit Ratings (ratings) remains stable. All companies are headquartered in Hartford, CT, unless otherwise specified. (See below for a detailed listing of the Long-Term IRs.)
The ratings of Nassau Insurance Group reflect its balance sheet strength, which AM Best categorizes as adequate, as well as its marginal operating performance, neutral business profile and appropriate enterprise risk management (ERM). The rating upgrades reflect the group’s improved ERM capabilities including improved internal controls as demonstrated by the recent remediation of all remaining material weaknesses inherited at the time of the acquisition of Nassau of NY. Nassau Insurance Group also maintains a formal risk appetite statement with defined risk tolerances and limits. Stress testing and sensitivity analysis under multiple scenarios also are performed.
The group continues to maintain a strong level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), as well as improved liquidity, with the addition of access to a Federal Home Loan Bank credit facility, access to approximately $140 million in cash and short-term investments at Nassau of New York and increased dividend capacity at Nassau Life Insurance Company, as well as access to committed capital from the group’s ultimate parent.
While liquidity has improved at PHL Variable Insurance Company, it has experienced significant losses in recent periods primarily due to increasing mortality in its universal life insurance line of business, and additional capital contributions likely will be needed over the near term. In addition, operating results for the overall Nassau Insurance Group have fluctuated over the past several years in part due to costs associated with the resolution of all material legacy litigation, as well as increased mortality in its universal life insurance block and several one-time events. Furthermore, premiums had been declining for a number of years due to a focus on improving capitalization and liquidity while developing a suite of new products for the marketplace. AM Best notes that premiums have increased over the most-recent period primarily due to an increase in annuity sales. AM Best expects a general improvement in the company’s operating performance over the medium term, as management continues to focus on streamlining operations and investing in growth as it re-enters the marketplace with new products.
The following Long-Term IRs have been upgraded with stable outlooks:
The Nassau Companies of New York, Inc.—
--to “b+” from “b” on $300 million 7.45% senior unsecured notes, due 2032 (approximately $253 million outstanding)
Nassau Life Insurance Company—
--to “bb-” from “b+” on $175 million 7.15% surplus notes, due 2034 (approximately $126 million outstanding)
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