A.M. Best Withdraws Ratings of Professional Life & Casualty Company

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OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Best Co. has affirmed the financial strength rating (FSR) of C+ (Marginal) and issuer credit rating (ICR) of “b-” of Professional Life & Casualty Company (Professional Life) (Chicago, IL). The outlook for both ratings is stable. Concurrently, A.M. Best has withdrawn the ratings at the company’s request and assigned a category NR-4 to the FSR and an “nr” to the ICR.

The ratings primarily reflect Professional Life’s elevated level of below investment grade fixed income securities and preferred stock in its general account investment portfolio. These below investment grade securities currently represent approximately 175% of the company’s capital and surplus and one-third of invested assets. While Professional Life currently maintains an adequate amount of risk-adjusted capital for its current ratings, these investments add a significant amount of risk and volatility to the investment portfolio. Professional Life also remains exposed by the absence of an active asset/liability management strategy, as well as by the company’s lack of surrender protection on its annuity offerings. The absence of surrender charges on these annuity contracts allows for early withdrawal of contracts for any reason and creates liquidity concerns for the company should annuity surrenders increase unexpectedly.

Partially offsetting these negative rating factors are the noticeable increases in Professional Life’s annuity premiums in recent periods, which were primarily the result of the favorable fixed annuity market environment in 2008 and 2009 and the company’s increased marketing activities. Professional Life also has recorded positive net operating gains over the past five-year period due to generally increasing net investment income and good persistency on its annuities. The annuities offer very attractive credited interest rates with high guaranteed minimums, which has helped attract new customers.

The principal methodology used in determining these ratings is Best’s Credit Rating Methodology -- Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best’s rating process and highlights the different rating criteria employed. Additional key criteria utilized include: “Risk Management and the Rating Process for Insurance Companies”; “Understanding BCAR for Life and Health Insurers”; and “A.M. Best’s Liquidity Model for U.S. Life Insurers.” Methodologies can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

CONTACT:

A.M. Best Co.
Michael Adams, 908-439-2200, ext. 5133
Senior Financial Analyst
michael.adams@ambest.com
or
Thomas Rosendale, 908-439-2200, ext. 5201
Assistant Vice President
thomas.rosendale@ambest.com
or
Rachelle Morrow, 908-439-2200, ext. 5378
Senior Manager, Public Relations
rachelle.morrow@ambest.com
or
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
james.peavy@ambest.com