AM Best has revised the outlooks to positive from stable and affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “bbb+” of Multinational Life Insurance Company (Multinational Life) (Hato Rey, Puerto Rico).
These Credit Ratings (reflect) the balance sheet strength, which AM Best categorizes as strong, as well as its adequate operating performance, very limited business profile and appropriate enterprise risk management (ERM).
The revised outlooks reflect the strengthening of Multinational Life’s business profile. In recent years, the company has expanded its more profitable core term life and cancer segments, where it continues to grow market share, while shifting away from its less profitable credit life and annuity segments. However, Multinational Life continues to operate in the highly competitive life and supplemental health insurance markets and maintains concentrations of business in term life and cancer products in Puerto Rico. AM Best will continue to monitor Multinational Life’s business diversification initiatives and introduction of innovative products into the Puerto Rico market.
Multinational Life’s balance sheet strength assessment of strong is based on its risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). This is partially offset by a surplus note comprising approximately one-fifth of absolute capital and surplus, annual dividends equating to approximately one-third of net income, and a relatively modest, yet growing level of absolute capital and surplus. The company’s stable operating performance over the last two years was driven by lower claims expense in 2019 and reduced sales commission expense from lower new sales in 2020, which was affected by the COVID-19 pandemic market conditions. Premium growth in 2019 was driven by new sales of cancer, group life and universal life products; however, COVID-19’s impact on Multinational Life’s sales practices reduced premium in 2020. AM Best expects earnings to remain favorable over the medium term based on the company’s strength in its distribution network and adoption of new innovative digital sales practices.
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