KBRA Affirms Stable Rating for Universal Life Insurance Company in Puerto Rico
Kroll Bond Rating Agency (KBRA) has affirmed the financial strength rating of Universal Life Insurance Company (ULICO) with a stable outlook. ULICO operates within the Puerto Rican insurance market as part of Universal Group, Inc., and is recognized as the largest life and annuity insurer domiciled in the region. The company benefits from a robust distribution network encompassing agents, banks, and broker-dealers, which supports its prominent market presence and consistent operating results over the past five years. ULICO's financial health is highlighted by a strong risk-adjusted capital position and dedicated Enterprise Risk Management resources, as evidenced by its Own Risk Solvency Assessment (ORSA) filing. Its product focus predominantly centers on individual annuities, including fixed and equity-indexed offerings, generating spread income. However, this concentration also poses risks related to margin compression from interest rate fluctuations, partially mitigated by reinsurance treaties. The insurer's asset portfolio includes elevated exposure to below-investment-grade bonds and high-risk assets, mainly due to funds withheld in a reinsurance agreement. Reliance on reinsurance contracts with nine counterparties introduces counterparty risk; notably, ongoing legal proceedings related to a closed fixed annuity block present potential uncertainty. While some proceeds have been received from recent asset sales, resolution outcomes may affect ULICO's ability to recapture related business. Future rating improvements could stem from sustained capital generation exceeding dividend payouts, favorable risk profile shifts, operational performance surpassing KBRA forecasts, or diversification of reinsurance counterparties. Conversely, rating downgrades could result from adverse risk profile changes, market position losses, poor operational results, capital declines, or unresolved reinsurance disputes impacting earnings. KBRA’s evaluation methodology emphasizes risk-adjusted capitalization, market and product concentration, counterparty risks, and operational consistency, providing a comprehensive creditworthiness perspective. These assessments support industry stakeholders in understanding ULICO’s competitive positioning and financial resilience within the Puerto Rican insurance sector.