Baltimore Life faces negative AM Best outlook as capital metrics weaken

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Baltimore Life negative outlook

Highlights

Baltimore Life's long-term issuer credit rating outlook was revised to negative by AM Best due to a five-year decline in balance sheet strength metrics.
Capital and surplus have decreased annually since 2020, with the company's capital and surplus to liabilities ratio now trailing the industry average.
Management implemented cost controls, product pricing changes, and expanded reinsurance to mitigate new business strain and target earnings recovery.

Rating action reflects weaker balance sheet trends

As reported by AM Best, the rating agency revises the outlook to negative from stable for The Baltimore Life Insurance Company’s long-term issuer credit rating and affirms its financial strength rating of B++ and long-term issuer credit rating of “bbb+”. The outlook for the financial strength rating remains stable.

AM Best says the ratings reflect the insurer’s strong balance sheet strength, along with adequate operating performance, a limited business profile and appropriate enterprise risk management. The agency says the negative outlook reflects a five-year trend of declining balance sheet strength metrics, driven by operating losses, unrealized losses in the investment portfolio and changes in non-admitted assets.

Capital and surplus has declined each year since peaking in 2020, with risk-adjusted capital, as measured by Best’s Capital Adequacy Ratio, also moving lower. AM Best adds that the company’s capital and surplus to liabilities ratio trails the industry average and has trended downward in recent years, although a high-quality investment portfolio, strong liquidity and no leverage in the capital structure partly offset those pressures.

Operational changes target earnings recovery

Operating losses have contributed to the decline in capital and surplus, according to the rating agency’s assessment. At the same time, Baltimore Life has generated strong direct premium growth over the past few quarters, creating a high degree of new business strain.

Management has responded with cost control measures, product pricing adjustments and increased reinsurance support to manage that strain. AM Best says those changes are expected to improve the insurer’s earnings profile in the near to medium term, a key factor for the Maryland life insurance market as carriers balance growth with capital preservation.

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