OLDWICK, N.J., OCTOBER 23, 2007
A.M. Best Co. has affirmed the financial strength rating (FSR) of A- (Excellent) and assigned issuer credit ratings (ICR) of "a-" to Pan-American Life Insurance Company (PALIC) (New Orleans, LA) and its affiliates, Pan-American Assurance Company (PAAC) (New Orleans, LA) and INRECO International Reinsurance Company (INRECO) (Grand Cayman, Cayman Islands). The outlook for the FSR has been revised to positive from stable, and the outlook assigned to the ICRs is positive.
These rating actions reflect PALIC's diverse business profile, which is supported by its three core business segments-- Latin America, International Dollar and U.S Domestic and Hispanic markets. These actions also recognize PALIC's excellent risk-adjusted capitalization, enhanced statutory operating results (net of extraordinary income and expense items) and its continuing new business development and initiatives to solidify its presence in the international and U.S. Hispanic life insurance markets.
Partially offsetting these positive rating factors are PALIC's evolving new business strategies in the U.S. Domestic and Hispanic markets, low reported operating returns relative to its capital and surplus position and continuing growth challenges in its Latin America region. PALIC has encountered earnings volatility due to numerous shifts in its operating strategies and a number of non-recurring events, both operating and investment related. Additionally, PALIC maintains a considerable position in highly rated collateralized mortgage obligations, which could be subject to price volatility in a changing interest rate environment. However, the company has no exposure to securities backed by sub-prime or alt A mortgages, CDOs or CLOs.
The positive outlook reflects A.M. Best's viewpoint that the current management team will be able to implement strategies, which will reduce the earnings volatility, improve reported operating results as it implements long-term and short-term new business growth strategies in the United States and Latin America.
For Best's Ratings, an overview of the rating process and rating methodologies, please visit Best's Rating Center.
Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.