AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a-”of Trustmark Insurance Company (Lake Forest, IL) and Trustmark Life Insurance Company of New York (Albany, NY) (collectively referred to as Trustmark Group), as well as Trustmark Life Insurance Company (Lake Forest, IL).
Concurrently, AM Best has affirmed the Long-Term ICR of “bbb-” of the holding company, Trustmark Group, Inc. (TGI) (Lake Forest, IL), and the Long-Term Issue Credit Rating of “bb” on $75 million floating rate trust preferred securities ($39 million outstanding), due 2035, issued by Trustmark Finance Trust I. The outlook of these Credit Ratings (ratings) is stable.
The ratings of Trustmark Group reflect its balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).
Trustmark Group’s capital level has grown steadily as a result of favorable earnings, and the group maintains the strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). Historically, the organization held an elevated amount of higher risk assets, and while this was mitigated somewhat by a recent portfolio reallocation, AM Best believes that there continues to be elevated mortgage-related exposure in aggregate across the investment portfolio. Trustmark Group has achieved revenue growth and continued operating profitability in recent periods across most of its core set of products and businesses. The organization maintains an established national marketing niche, primarily among midsized employer groups offering voluntary worksite benefits. However, A.M. Best also notes that the Trustmark Group operates in the highly competitive voluntary benefits market, which includes many national and regional insurers. Additionally, the group remains somewhat exposed to geographic concentration risk, with more than half of its business generated in five states. While its ERM is supported by a good governance structure, AM Best will continue to monitor its practices for future improvements.
The ratings of Trustmark Life Insurance Company reflect its balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, limited business profile and appropriate ERM.
Trustmark Life Insurance Company also maintains the strongest level of risk-adjusted capitalization, as measured by BCAR. The company’s capital level has grown over the past few years through consistent operating gains, which have been offset partially by dividend payments to its parent. The company has a lower exposure to higher risk assets than its affiliate entities.
Trustmark Life Insurance Company focuses on the small-group, self-funded medical market, which is very competitive, with carriers increasingly seeking new business in this space. As a result, revenues from this business had been on a declining trend. However, more recently there have been improvements. ERM at Trustmark Life Insurance Company is managed in conjunction with the Trustmark Group.
TGI’s business diversity reflects the operating subsidiaries’ voluntary life, supplemental health and small-group, self-funded insurance products, as well its non-insurance administrative, wellness and health management services. Financial leverage in the organization is manageable, with a conservative debt-to-capital ratio of approximately 5.5%, and strong interest coverage at greater than 14 times.
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