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TMCNet:  A.M. Best Revises Issuer Credit Rating Outlook to Negative for The Savings Bank Mutual Life Insurance Company of Massachusetts

[November 10, 2017]

A.M. Best Revises Issuer Credit Rating Outlook to Negative for The Savings Bank Mutual Life Insurance Company of Massachusetts

A.M. Best has revised the outlook to negative from stable for the Long-Term Issuer Credit Rating (Long-Term ICR) and affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term ICR of "a+" of The Savings Bank Mutual Life Insurance Company of Massachusetts (SBLI) (Woburn, MA). The outlook of the FSR remains stable.

The negative Long-Term ICR outlook reflects the company's risk associated with its moderate quality of capital and limited financial flexibility as evidenced through the reliance on reinsurance captive solutions to support the company's future capital position and new business growth. In addition, operating losses at the captive level would continue to be a drag on absolute capital at the operating level in the intermediate term until the statutory reserves of the captives reach their inflexion point.

Partially offsetting the quality of capital is SBLI's overall balance sheet, which is categorized as "strongest" by A.M. Best. This is supported by a solid level of risk-based capital, as measured by the Best's Capital Adequacy Ratio (BCAR), a good reserve profile, and adequate liquidity measures. Further, in the third quarter of 2017, the company bought back the full outstanding external private shareholder stakes, which represented 37.5% of the company's ownership. This was financed through the issuance of a $57 million in surplus note due in 2047. While A.M. Best believes the servicing of the surplus note in the short run will negatively impact capital relative to prior shareholde dividends paid, the cleaner ownership structure coupled with capping and stabilizing future servicing costs to providers of capital are potential long-run positives. The company has identified sources of capital that could be used to repay the surplus notes at or prior to maturity if so desired.

A.M. Best will continue to monitor the company's capital position and the remaining of its operation.

This press release relates to Credit Ratings that have been published on A.M. 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 A.M. Best's Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best's Credit Ratings. For information on the proper media use of Best's Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best's Credit Ratings and A.M. Best Rating Action Press Releases.

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