AM Best has downgraded the Financial Strength Rating (FSR) to C (Weak) from C+ (Marginal) and the Long-Term Issuer Credit Rating (Long-Term ICR) to “ccc+” from “b-” of Atlanta Life Insurance Company (ALIC) (Atlanta, GA). The outlook of the FSR has been revised to stable from negative while the outlook of the Long-Term ICR is negative. Concurrently, AM Best has withdrawn these Credit Ratings (ratings) as the company has requested to no longer participate in AM Best’s interactive rating process.
The ratings reflect ALIC’s balance sheet strength, which AM Best assesses as weak, as well as its weak operating performance, very limited business profile and weak enterprise risk management (ERM).
The rating downgrades reflect significant declines in ALIC’s capital driven by a trend of worsening operating losses beginning in 2017. Despite a onetime favorable benefit due to a $4 million capital contribution from the parent in 2019, ALIC continues to see substantial declines in both capital and operating performance metrics through the 3rd quarter of 2020. If the company continues to experience operating losses at a similar rate without a capital infusion in the near term, AM Best expects that regulatory action may be necessary within the next 12 months. The company is pursuing capital investment from strategic investor parties to fund operations and the company’s growth initiatives. Further complicating the company’s operations is the removal of the CEO and the replacement of the company’s former actuarial consultant with a new appointed actuary, Willis Towers Watson, which still needs to complete its actuarial review. AM Best notes that there has been an ongoing trend of weak ERM practices, which have been a contributing rating factor.
Despite these numerous challenges, the company continues to maintain a risk-adjusted capital position above regulatory action levels. AM Best further notes that commencing in the fourth quarter of 2020, ALIC has executed group life reinsurance treaties with several major insurance carriers on behalf of approximately 20 major corporate, government and association clients; the substantial majority of the company’s associated risk has been retroceded to its retrocession partners. As such, ALIC has grown net premium for the first time in several years in 2020 and this continued in the first quarter of 2021.
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