OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has revised the outlooks to positive from stable and affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” of SILAC Insurance Company (SILAC) (Salt Lake City, UT).
The ratings reflect SILAC’s balance sheet strength, which AM Best categorizes as adequate, as well as its adequate operating performance, limited business profile and marginal enterprise risk management (ERM).
The revision of the outlooks to positive reflects the continued strengthening of the company’s ERM program. Management has developed a strong ERM framework over the past two years with a well-defined risk identification process and governance structure. The company continues to build out the program with a focus on risk-management and controls, and stress-testing. The positive outlooks also reflect AM Best’s expectation that SILAC will continue to maintain adequate risk-adjusted capitalization and favorable operating performance, and manage its annuity business growth in correlation with capital expansion.
SILAC’s balance sheet strength assessment is driven by strong risk-adjusted capital, as measured by Best’s Capital Adequacy Ratio (BCAR). However, capital growth until recently had been driven by capital contributions raised from outside the organization. Furthermore, the investment portfolio has material exposures to higher risk and less liquid assets including below investment grade bonds, commercial mortgage loans and private equity. SILAC also utilizes a high level of reinsurance to manage its risk-adjusted capital in support of its annuity business growth.
Operating performance turned favorable in 2019 as gains from the company’s annuity business more than offset losses from the company’s legacy business. Direct and net premium growth has been very strong over the past two years driven by sales of its multi-year guarantee annuities and fixed indexed annuity products.
SILAC’s business profile is limited due to a concentration in individual annuity products, which drive the company’s revenues and earnings. The company is focused on attaining organic growth, product diversification and growing distribution. The company primarily markets its products through a diversified group of independent marketing organizations.
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