AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a-” of Trustmark Insurance Company (Lake Forest, IL) and Trustmark Life Insurance Company of New York (Albany, NY) (collectively referred to as Trustmark Group), as well as Trustmark Life Insurance Company (Lake Forest, IL). Concurrently, AM Best has affirmed the Long-Term ICR of “bbb-” of the holding company, Trustmark Group, Inc. (TGI) (Lake Forest, IL), and the Long-Term Issue Credit Rating of “bb” on the $75 million floating rate trust preferred securities ($39 million outstanding), due 2035, issued by Trustmark Finance Trust I. The outlook of these Credit Ratings (ratings) is stable.
The ratings of Trustmark Group reflect its balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).
Trustmark Group has maintained solid levels of capital and surplus over the past few years, mostly driven by steadily growing favorable earnings, which has resulted in the group having the strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). The asset portfolio allocation is primarily composed of investment grade fixed income securities; however, over the last two years, the organization has increased its portfolio allocations to joint ventures and limited partnerships, as well as commercial mortgage loans. AM Best will be periodically monitoring the allocation and portfolio shifts between these higher risk assets.
Revenue growth and continued operating profitability across most of its core set of products and businesses has contributed to the overall results. The organization maintains an established national marketing niche, primarily among midsized employer groups, offering a suite of voluntary worksite benefits. However, AM Best notes that the Trustmark Group operates in the highly competitive voluntary benefits market, which includes many national and regional insurers. With more than half of its revenue being generated in five states, the group is exposed to a certain level of geographic concentration risk. Trustmark also employs a formalized ERM program that is supported by an established governance structure, processes and procedures.
The ratings of Trustmark Life Insurance Company reflect its balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate ERM.
Trustmark Life Insurance Company also maintains the strongest level of risk-adjusted capitalization, as measured by BCAR. The company has a history of dividend payments to its parent, but it has managed to maintain strong capital levels over the past few years through consistent operating gains. The company has a lower exposure to higher risk assets than its affiliated entities.
Trustmark Life Insurance Company derives most of its revenue from the small-group medical, self-funded stop-loss market, which is very competitive, with carriers increasingly seeking new business in this space. Notwithstanding the competitive environment, Trustmark Life Insurance Company has been gaining market share. ERM practices at Trustmark Life Insurance Company are managed in conjunction with the Trustmark Group.
TGI’s business diversity reflects the operating subsidiaries’ voluntary life, supplemental health and small-group self-funded insurance products, as well its non-insurance third-party administration, wellness and fitness management services. Financial leverage in the organization is manageable, with a conservative debt-to-capital ratio of approximately 5%, and strong interest coverage.
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 media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
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