AM Best Downgrades Issuer Credit Rating of Gulf Guaranty Life Insurance Company, Revises Under Review Status to Developing Implications

OLDWICK, N.J.--(BUSINESS WIRE)--
AM Best has downgraded the Long-Term Issuer Credit Rating to “bbb” (Good) from “bbb+” (Good) and affirmed the Financial Strength Rating of B++ (Good) of Gulf Guaranty Life Insurance Company (Gulf Guaranty Life) (Flowood, MS). AM Best has maintained the under review status of these Credit Ratings (ratings), while revising the implications status to developing from negative.

The ratings reflect Gulf Guaranty Life’s balance sheet strength, which AM Best assesses as adequate, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.

The Long-Term ICR downgrade is attributed to a deterioration in the company’s absolute and risk-adjusted capital in 2021, driven by rapid premium growth in its core limited benefit medical product and a material reserve increase for this product. While the run out of 2021 claims has been favorable compared with the reserves, the rapid premium growth in 2022 put further pressure on the company’s risk-adjusted capitalization. In addition, the absolute capital was negatively impacted by $2.3 million of unrealized losses on the equity portfolio, as of Sept. 30, 2022.

Gulf Guaranty Life’s management intends to bolster its absolute capital through a sale of the real estate assets by 2022 year-end. In addition, the performance of the business remains sound with profitability in line or better compared with historical levels. As a result, AM Best expects the company’s year-end 2022 risk-adjusted capitalization to improve; however, it will remain below expectation for the rating level.

To better align future premium and capital growth, the company plans to moderate its premium expansion in 2023 through non-renewal of certain accounts. Furthermore, the planned reduction in management fees paid to the company’s administrative affiliate for 2023 should result in significant improvement of profitability, capital accumulation and a subsequent strengthening of risk-adjusted capitalization. The under review with developing implications status of these ratings reflects uncertainty regarding the fulfillment of the aforementioned initiatives to support the trend of improving risk-adjusted capitalization.

AM Best will continue discussions with management to monitor the status of their capital replenishment plan and the company's balance sheet position.

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 use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2022 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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Doniella Pliss
Director

+1 908 439 2200, ext. 5104

doniella.pliss@ambest.com

Brian Virostek
Financial Analyst

+1 908 439 2200, ext. 5531

brian.virostek@ambest.com

Christopher Sharkey
Manager, Public Relations

+1 908 439 2200, ext. 5159

christopher.sharkey@ambest.com

Al Slavin
Senior Public Relations Specialist

+1 908 439 2200, ext. 5098

al.slavin@ambest.com

Source: AM Best