A.M. Best Affirms Ratings of Investors Trust Assurance SPC

A.M. Best Co. has affirmed the financial strength rating of B++ (Good) and issuer credit rating of “bbb+” of Investors Trust Assurance SPC (ITA) (Cayman Islands). The outlook for both ratings is stable.

ITA is a closely held company that focuses on selling U.S. dollar and Euro denominated unit-linked insurance policies to middle class consumers through a distribution network of independent financial advisors in Latin America and Asia Pacific. The unit-linked policies are characterized by regular contributions spanning many years with relatively high sales loads and surrender charges that are comparable to those of its competitors. The unit-linked policies are designed to allow the policyholder to access name brand investment products in stable currencies and to build up assets on a tax deferred basis. ITA recently expanded its product offerings to include a fixed income portfolio that became available in 2010.

The ratings of ITA consider its profitable operations and strong risk-based capitalization measures. ITA has relatively limited insurance risks because the company’s policies carry a limited death benefit. The ratings also acknowledge ITA’s broad network of independent financial advisors in Latin America and Asia Pacific, its eight-year operating history since inception, management’s prior history of relevant investment marketing experience and increases in new sales for the current year driven by a new product offering.

These positive factors are partially offset by the correlation of policy sales with the performance of equity market indices and the intense competition with several well known insurance companies that provide life insurance and similar asset management services. The ratings also recognize the company’s inconsistent earnings trends in recent years, the reliance on the market value of assets under management for a portion of revenue and the lack of sophisticated policies regarding investment of the company’s surplus assets. Another challenge for ITA is achieving a favorable market investment portfolio performance in the current difficult economic climate, a challenge faced by the entire insurance and financial industry.

The principal methodology used in determining these ratings is Best’s Credit Rating Methodology -- Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best’s rating process and highlights the different rating criteria employed. Additional key criteria utilized include: “Risk Management and the Rating Process for Insurance Companies”; “Understanding Universal BCAR”; and “Assessing Country Risk.” Methodologies can be found at http://www.ambest.com/ratings/methodology.