OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has removed the under review with negative implications and affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of Blue Cross Life Insurance Company of Canada (BCLIC) (Moncton, New Brunswick, Canada). The outlook assigned to the Credit Ratings (ratings) is negative.
The ratings reflect BCLIC’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
The removal of the under review with negative implications status reflects BCLIC’s risk-adjusted capitalization, which has been impacted from write-downs on its private loan holdings, related to one of its asset manager, and a higher risk charge amount to support larger blocks of business from higher sales. The transfer of a significant block of business from PBC Health Benefits Society and a pending transfer of a block of business from Canassurance Hospital Service Association, as each became a shareholder and distributor in 2020, also impacted BCLIC’s risk-adjusted capitalization. AM Best notes that despite impairments taken through the third quarter of 2021, additional impairments, if required, will be manageable and supportive of an adequate Best’s Capital Adequacy Ratio (BCAR) assessment.
BCLIC was placed under review with negative implications on June 10, 2021, upon discovery that BCLIC’s asset manager for private loans, Bridging Finance, was placed under receivership by Canadian regulatory authorities due to fraudulent activities. The assigned outlooks of negative reflect AM Best’s expectations that further write-downs from the private loan portfolio or negative operating performance may lead to a decline in risk-adjusted capitalization, as measured by BCAR. AM Best will continue to monitor trends in risk-adjusted capital, which could lead to a revision to its overall balance sheet assessment if the loan portfolio is sold at an amount substantially below the current carrying value on BCLIC’s balance sheet. Alternatively, the outlooks could be revised to stable if the portfolio is sold at or above current carrying value and there is an increase in BCAR ratios driven by organic earnings growth. On a qualitative basis, BCLIC’s balance sheet assessment is enhanced by its accountability business model, which shares underwriting profits with its shareholders/distributors.
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