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A.M. Best Revises Outlook to Stable for William Penn Association

June 23, 2014



ENP Newswire - 23 June 2014

Release date- 20062014 - A.M. Best has revised the outlook to stable from negative and affirmed the financial strength rating of B++ (Good) and issuer credit rating of 'bbb' of William Penn Association (WPA or Association) (Pittsburgh, PA).

The revised outlook reflects the Association's improved risk-adjusted capitalization and reduced concentration of premiums related to fixed annuities. Furthermore, WPA has reported consistently increasing net operating gains and net income, which led to growth in unassigned funds.

The Association maintains a long history in the fraternal marketplace and strong persistency resulting from the loyal nature of its member base, which somewhat mitigates the limited surrender protection on its annuities. The Association has improved its risk profile in recent years by discontinuing annuities with no surrender charge protection, adding five and nine year surrender charge periods and lowering the minimum guaranteed crediting rate to one percent on new sales.

Partially offsetting these positive rating factors are WPA's concentrated exposure to interest sensitive fixed annuities, high proportion of annuities with high guaranteed rates and the related risk of spread compression, as well as a limited business profile including geographic and business concentration risks. To maintain favorable yield spreads on its annuity policies, the investment portfolio has purchased long-term bonds which may expose the Association to disintermediation risk in a rising interest rate environment as the majority of annuity contracts are not subject to surrender charges. A.M. Best notes, however, this risk is mitigated by WPA's high crediting rates and strong retention experience.

Following the revised outlook, positive rating actions are unlikely in the near term. Factors that could lead to negative rating actions include further concentration risk to WPA's business profile in interest sensitive annuities with high guaranteed crediting rates, spread compression leading to an unfavorable trend in operating results, increased extension risk within the fixed income portfolio or declines in its risk-adjusted capitalization.

The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.

A.M. Best's credit ratings are independent and objective opinions, not statements of fact. A.M. Best is not an Investment Advisor, does not offer investment advice of any kind, nor does the company or its Ratings Analysts offer any form of structuring or financial advice. A.M. Best's credit opinions are not recommendations to buy, sell or hold securities, or to make any other investment decisions.

A.M. Best receives compensation for its rating services from the organizations that it rates, unless such ratings are identified with a Public Data modifier ('pd'). Public Data ratings are based on information available in the public domain and indicate the more limited scope of the rating and the fact that the company did not initiate the rating. A.M. Best does not send entities assigned a 'pd' rating an invoice for its rating services and does not assign ratings to securities issued by companies assigned a Best's 'pd' rating. A.M. Best may also receive compensation from rated entities for non-rating related services or products offered by A.M. Best. A.M. Best does not offer consulting or advisory services. For more information regarding A.M. Best's rating process, including handling of confidential (non-public) information, independence, and avoidance of conflicts of interest, please read the A.M. Best Code of Conduct.

A.M. Best Company and its subsidiaries are not registered as External Credit Assessment Institutions (ECAI) in the European Union (EU). Credit ratings issued by A.M. Best Company and its subsidiaries can not be used for regulatory purposes in the EU as per Directive 2006/48/EC.

A.M. Best's credit ratings are independent and objective opinions, not statements of fact. A.M. Best is not an Investment Advisor, does not offer investment advice of any kind, nor does the company or its Ratings Analysts offer any form of structuring or financial advice. A.M. Best's credit opinions are not recommendations to buy, sell or hold securities, or to make any other investment decisions. View our entire notice for complete details.

A.M. Best receives compensation for interactive rating services provided to organizations that it rates. A.M. Best may also receive compensation from rated entities for non-rating related services or products offered by A.M. Best. A.M. Best does not offer consulting or advisory services. For more information regarding A.M. Best's rating process, including handling of confidential (non-public) information, independence, and avoidance of conflicts of interest, please read the A.M. Best Code of Conduct.

A.M. Best - Europe Rating Services Limited (AMBERS), a subsidiary of A.M. Best Company, is an External Credit Assessment Institutions (ECAI) in the European Union (EU). Therefore, credit ratings issued by AMBERS may be used for regulatory purposes in the EU as per Directive 2006/48/EC.


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Source: ENP Newswire


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