OLDWICK, New Jersey – (COMMERCIAL THREAD) –AM Best has placed under review with developing implications the financial strength rating of B + (good) and the issuer’s long-term credit rating of âbbb-â (good) of SILAC Insurance Company (SILAC) (Salt Lake) City, UT).
SILAC came under review with developing implications as the company’s risk-adjusted capital, as measured by Best’s capital adequacy ratio (BCAR), declined to an assessed level of low at the end of the year. the year 2020. The company’s capital has been severely strained by rapid growth in turnover and an increase in sub-investment grade bonds in its general account investment portfolio. However, during the year 2021, SILAC reduced its allocation to bonds below the investment grade.
SILAC took action to counter BCAR’s low valuation with the receipt of a $ 40 million capital contribution in the fourth quarter of 2021 from its parent company, SILAC, Inc., and a commitment on an excess rating of $ 60 million. of dollars to be closed in early January 2022. In addition, SILAC has undertaken to increase the company’s internal risk capital management objective to 600% of the authorized control level (ACL) (300% of the level of company action [CAL]) from 400% ACL (200% CAL). AM Best acknowledges that SILAC has recorded favorable profits over the past year, which has positively contributed to SILAC’s capital situation. However, the relatively high level of financial leverage and reinsurance of the company somewhat diminishes the overall quality of the organization’s capital, and interest expense can put some pressure on profits in the short to medium term.
Ratings will remain under review until AM Best can fully assess the company’s investment plans, including its ability to secure additional capital and manage top-line growth to maintain a acceptable level of risk-adjusted capitalization, as measured by BCAR, for its current ratings. .
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