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    Home»Insurance»AM Best withdraws from review with negative implications, assigns negative outlook to Best Meridian Insurance Company and Best Meridian International Insurance Company SPC
    Insurance

    AM Best withdraws from review with negative implications, assigns negative outlook to Best Meridian Insurance Company and Best Meridian International Insurance Company SPC

    October 21, 20224 Mins Read
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    OLDWICK, NJ–(BUSINESS WIRE)–
    AM Best was removed from review with negative implications and affirmed the financial strength rating of A- (Excellent) and the issuer’s long-term credit rating of “a-” (Excellent) of Best Meridian Insurance Company (BMIC) (Miami, Florida) and Best Meridian International Insurance Company SPC (BMIIC) (Grand Cayman, Cayman Islands). The outlook assigned to these credit ratings (ratings) is negative. These companies are collectively referred to as Best Meridian.

    The ratings reflect the strength of Best Meridian’s balance sheet, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate management of business risks.

    This rating action reflects the ownership’s commitment to recapitalize the business following the deterioration of its risk-adjusted capitalization in 2021 and the first half of 2022. This deterioration was driven by severe losses at BMIC in 2021 due to the COVID-19 pandemic, as well as increases in reinsurance recoveries associated with a relatively new property and casualty reinsurance business and deferred acquisition costs at BMIIC due to increased life insurance sales. Furthermore, capitalization in the first six months of 2022 remains under pressure due to a significant loss in market value on the asset portfolio and a large dividend paid by BMIIC. To support capitalization, BMI Financial Group, the ultimate parent company of BMIC and BMIIC, will make capital contributions in the fourth quarters of 2022 and 2023, and will suspend any planned dividend payments in 2023 to support the recapitalization of the business. However, AM Best remains concerned about the continued projected growth in reinsurance recoverables, deferred acquisition cost balances, combined with volatile investment markets that could push risk-adjusted capitalization, as measured by the Best Capital Adequacy Ratio (BCAR), at a level that is no longer favorable to current ratings. The potential for significant financial earnings volatility affecting capitalization supports the continued negative outlook.

    Previous pressure on capitalization due to increased delinquencies in the mortgage portfolio has largely dissipated through 2021 and into 2022 as debtors either returned in good standing or Best Meridian successfully foreclosed on the associated property. Part of the mortgage portfolio remains in arrears; however, this book is now much smaller in size and loss prevention strategies have proven effective. BMIC underwriting losses on life and health business due to COVID-19 continued in the first quarter of 2022, but were much lower than in 2021. In the first half of 2022, underwriting losses were negligible and more than offset by investment income for net profitability of BMIC over the period.

    The management team plans to restore BMIC to the capital position it enjoyed before incurring excessive losses in 2021 through a series of capital injections in 2022 and 2023 to supplement profits. In addition, the capital contributions and the suspension of the dividend are intended to support the capitalization of BMIIC.

    AM Best notes that the company has demonstrated its ability to manage and mitigate some of the negative impacts of the aforementioned developments. The company has implemented rate and fee increases for its life/health insurance policies, worked diligently with creditors to restore the mortgage portfolio and continues to refine the rigorous screening and selection process customers and reinsurance counterparties. The company has also shown willingness to provide capital support if needed. AM Best will continue to monitor the results of the organization to see if these measures will prove sufficient to curb the negative trends in risk-adjusted funding measures.

    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 relevant disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Assessment Activity Web page. For more information on the use and limitations of credit rating opinions, please see Best Credit Score Guide. For more information on the proper use of Best’s Credit Scores, Best’s Performance Ratings, Best’s Preliminary Credit Ratings, and AM Best’s press releases, please see Guide to Proper Use of Best’s Ratings and Reviews.

    AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Based at United Statesthe company does business in more than 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 AM Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

    src=”https://cts.businesswire.com/ct/CT?id=bwnewssty=20221021005340r1sid=acqr8distro=nxlang=fr” style=”width:0;height:0″ />

    Show source version on businesswire.com: https://www.businesswire.com/news/home/20221021005340/en/

    John McGlynn
    Financial Analyst

    +1 908 439 2200 ext. 5730

    [email protected]

    Doniella Pliss
    Director

    +1 908 439 2200 ext. 5104

    [email protected]

    Christopher Sharkey
    Manager, Public Relations

    +1 908 439 2200 ext. 5159

    [email protected]

    Al Slavin
    Communications Specialist

    +1 908 439 2200 ext. 5098

    [email protected]

    Source: AM Best

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