AM Best downgrades Universal Life Insurance Co.’s credit ratings
However, the outlook was revised from negative to stable.
* With editorial updates throughout
Credit rating agency AM Best has downgraded the Financial Strength Rating of Universal Life Insurance Co. (ULICO), based in Guaynabo, from B+ (Good) to B (Fair) and the Long-Term Issuer Credit Rating from “bbb-” (Good) to “bb+” (Fair).
In addition, AM Best revised the outlook for ULICO from negative to stable.
“The Credit Ratings (ratings) reflect ULICO’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,” AM Best stated in its briefing.
The downgrade is attributed to a revision in the operating performance assessment from “strong” to “adequate.”
“Operating performance, while consistently profitable, has experienced a declining trend over the past several years, partially related to market conditions and non-recurring items,” AM Best noted.
However, second quarter results “reflect improving conditions versus prior year,” it stated.
“ULICO continues to reduce the effect of the counterparty risk with Private Bankers Life & Annuity, most recently with the Aug. 9, 2024, court appointment of a receiver assigned to execute ULICO’s judgment, but progress has been slow,” the agency said.
“While ULICO maintains a top market position in Puerto Rico, its business profile is limited by its concentrated product offering and geography. AM Best will continue to monitor the financials of ULICO,” it added.
Universal reacts
In a separate statement, Universal stated it has achieved a “significant milestone” as it looks to execute its judgment against Greg Lindberg, owner of the reinsurer Private Bankers Life and Annuity (PBLA).
“In recent years, Universal Life Insurance Company has spared no resources or expenses to get this matter resolved to safeguard the capital of the leading conglomerate to which it belongs,” the company stated in writing.
On Aug. 9, 2024, a North Carolina superior court appointed Bill Janvier as general receiver over the assets of Greg Lindberg. The court order states that the receiver has the authority to manage, collect, control, protect and even sell assets of the Debtors property for the benefit of the creditors. Now that the assets are fully removed from the control of Greg Lindberg, there is a process underway to monetize assets with an expected value that considerably exceeds the amount of Universal Life’s judgment.
As part of this process, and due to the time, that has passed, the rating agency AM Best adjusted Universal Life’s credit rating to B, while improving the outlook to Stable from Negative. In the same evaluation cycle, AM Best affirmed the A-stable rating of its parent company, Universal Insurance Company. This affirmation is a recognition of the financial strength and solidity of the Universal Group conglomerate.
Regarding the action on Universal Life, its President, José Benítez, said “there are significant positive developments with the appointment of the receiver to execute Universal Life’s judgment, while the company has seen strong financial results in 2024 and expect this trend to continue. As soon as we complete this process, we will request another rating adjustment.”
He also noted that “Universal Life has consistently reported excellent financial results, having achieved fifteen consecutive years of profits and reflecting the highest capitalization among local life and annuities insurers, with a steady growth pattern. This growth is the result of innovative financial solutions developed with favorable tax advantages for the benefit of Puerto Ricans.”
