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Category: White Paper

No Surprise – Hallmark Insurer Subsidiaries Downgraded

As if on cue, last Friday (May 5th) A.M. Best downgraded the Hallmark Financial subsidiaries below the critical “A-” level to “B++” (5th highest), citing a “significant decline in Hallmark’s balance sheet strength and operating performance due to continued adverse development in the group’s retained discontinued commercial auto lines.”

Lincoln National Reinsures $28 Billion of Reserves to Fortitude Re

On May 2, 2023, Lincoln National Corp. announced that it had entered into a reinsurance transaction with
Fortitude Reinsurance Company, Ltd. (Fortitude Re), a Bermuda domiciled reinsurer. The transaction comprises $28 billion of reserves (on a statutory accounting basis) and encompasses several blocks of business held by LNC’s life insurance subsidiaries which include:

U.S. Life Insurer Exposure to Less Liquid Bonds

Life insurers have long held a mix of assets with various liquidity profiles, from the very liquid to the
nearly illiquid. Investments with the highest liquidity include investment grade bonds (especially
government bonds), securities with a short remaining duration, and cash and cash equivalents. Less liquid securities include mortgage loans, below investment grade bonds, and alternative investments.

Mortgage Loan Exposure for Life Insurers

Mortgage loans have long been one of the most important asset classes for life insurers. Life insurers do not have substantial direct investments in real estate, but they do participate in real estate investing by loaning money directly to property owners or real estate developers……

Liquidity and Risks for Life Insurers

There has been considerable client interest in the liquidity of life insurance and annuity companies in the wake of
bank regulatory actions against Silicon Valley Bank (SVB) and Signature Bank of New York (SBNY) over the
last several days. The concerns are understandable given a number of similarities between banks and life insurance companies, including the following:

Topa Insurance Gets Lifeline from Granada Financial Group

This past week Granada Financial Group (GFG) agreed to acquire a majority stake in Topa Equities, parent company of Topa Insurance Company and subsidiary Dorchester Insurance Company. Per our recent release on the upcoming sale of Argo Group, this is yet another example of a commercial specialty lines carrier taking remedial action in the face of poor operating results. What makes this transaction more interesting is the acquirer.