A.M. Best has revised The Savings Bank Mutual Life Insurance Company of Massachusetts’ (SBLI) long-term issuer credit rating outlook from stable to negative.
The rating agency also affirmed the financial strength rating of “A (Excellent)” and the long-term issuer credit rating of “a+” of SBLI.
The revised outlook reflects the company’s risk associated with its moderate quality of capital and limited financial flexibility, as shown through the reliance on reinsurance captive solutions to support the company’s growth.
Partially offsetting the quality of capital is SBLI’s overall balance sheet, which A.M. Best categorised as “strongest”. This is supported by a solid level of risk-based capital, a good reserve profile, and adequate liquidity measures.
Further, in the Q3 2017, the company bought back the full outstanding external private shareholder stakes, which represented 37.5 percent of the company’s ownership. This was financed through the issuance of a $57 million in surplus note due in 2047.
A.M. Best suggested that while the servicing of the surplus note will negatively impact capital in the short run, relative to prior shareholder dividends paid, the cleaner ownership structure, and capping and stabilising future servicing costs to providers of capital are “potential long-run positives”.
