AM Best has removed from under review with negative implications and affirmed the Financial Strength Rating of B+ (Good) and the Long-Term Issuer Credit Rating of "bbb-" of Universal Life Insurance Company (San Juan, PR) (Universal Life), following its efforts to secure capital through its parent company, Universal Insurance Company (UNICO). The outlook assigned to the Credit Ratings (ratings) is negative.
The ratings reflect Universal Life’s balance sheet strength, which AM Best categorizes as adequate, as well as its strong operating performance, limited business profile and marginal enterprise risk management.
The removal of the ratings from under review is predicated on Universal Life securing access to capital through UNICO, which has established a surplus note of $25 million with the option to issue additional notes up to $100 million. Liquidity in general terms remains strong. The surplus note is earmarked for the liquidity needs of Universal Life, should it be needed. The capital raise plan, underwritten by The Phoenix Fund, was approved by the Insurance Commissioner of Puerto Rico in December 2020.
The negative outlook is due primarily to the counterparty risk attributed to the fixed-annuity assets maintained and held in trust by Private Bankers Life & Annuity Co., Ltd. (PBLA), the reinsurer of Universal Life’s block of legacy fixed-annuity business. However, Universal Life has limited the effects of the counterparty risk through its new business contract. As of Jan. 1, 2020, fixed annuity policies issued from June 1, 2019, are being ceded to Shenandoah Life Insurance Company as part of a new reinsurance agreement for fixed annuity business.
PBLA is a Bermuda-domiciled company with direct ties to Greg E. Lindberg, who was convicted of wire fraud and bribery charges by a U.S. federal jury in March 2020. Universal Life’s plan to recapture the PBLA fixed-annuity trust fund and place it with a new reinsurer is still in place. Even though the process continues, it has taken longer than AM Best’s expectations.
This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
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