OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has downgraded the Financial Strength Rating to B+ (Good) from B++ (Good) and the Long-Term Issuer Credit Rating to “bbb-” (Good) from “bbb+” (Good) of Upstream Life Insurance Company (Upstream) (Dallas, TX). Concurrently, AM Best has placed the Credit Ratings (ratings) under review with negative implications.
The ratings reflect Upstream’s balance sheet strength, which AM Best assesses as adequate, as well as its adequate operating performance, limited business profile and marginal enterprise risk management (ERM).
The rating downgrades reflect a revision to Upstream’s balance sheet assessment to adequate from very strong, as well as a revision to its ERM capabilities to marginal from appropriate. These actions follow a significant decline in risk-adjusted capitalization that occurred at year-end 2020 and a further decline reported in the first quarter of 2021. These declines were driven largely by a number of highly concentrated assets on the balance sheet that exceeded the Texas Department of Insurance’s issuer limitations and two unrated securities, both of which contributed to a large amount of non-admitted assets. Subsequent to the end of first-quarter 2021, a significant portion of assets have been sold, which indicates that capital will be down marginally from year-end 2020. These actions led to AM Best’s revised assessment of Upstream’s ERM capabilities.
The under review with negative implications status reflects continued uncertainty regarding future risk-adjusted capitalization levels and the resolution of remaining non-admitted assets, along with monetization of receivables related to significant asset sales in the second quarter of 2021. AM Best will continue to monitor the company’s recapitalization efforts, which may include reinsurance as well as an internal revisions to its corporate structure, which will increase reported capital.
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