AM Best

A.M. Best Upgrades Continental Life Insurance Company and Its Subsidiary

 Wayne Kaminski
Senior Financial Analyst
(908) 439-2200, ext. 5061

Sally Rosen
Managing Senior Financial Analyst
(908) 439-2200, ext. 5280
Rachelle Morrow
Senior Manager, Public Relations
(908) 439-2200, ext. 5378

Jim Peavy
Assistant Vice President, Public Relations
(908) 439-2200, ext. 5644


OLDWICK, N.J. - NOVEMBER 18, 2011 12:00 AM (EST)
A.M. Best Co. has upgraded the financial strength rating to A (Excellent) from A- (Excellent) and issuer credit ratings to "a" from "a-" of Continental Life Insurance Company of Brentwood, Tennessee (CLIC) and its subsidiary, American Continental Life Insurance Company (ACIC) (both domiciled in Brentwood, TN). All ratings have been removed from under review with positive implications and assigned a stable outlook.

The upgrading of the ratings for CLIC and ACIC reflect both companies' premium and membership growth, the adequate risk-adjusted capital to support their growing membership base and the new parent company, Aetna Inc.'s capital support.

Both companies' consolidated net premiums written have grown over the past five years; and the majority of the growth is derived from new Medicare Supplement sales written through ACIC. Risk-adjusted capital levels are expected to decline over the near term as the net premiums written trend continues to grow and near term losses pressure capital growth. A.M. Best expects capital support from Aetna Inc. to offset the strain of new business and maintain risk-based capital at or exceeding historical levels at CLIC.

Offsetting rating factors include the group's decline in earnings, strong competitive pressure in the Medicare Supplement marketplace and the potential impact proposed legislative changes to the Medicare system would have on the group's Medicare supplement earnings. Over the past five years, the consolidated statutory earnings of CLIC with ACIC have decreased during a period of strong growth. This decline is reflective of the intensely competitive Medicare Supplement marketplace and higher costs to acquire new business. A.M. Best will be monitoring legislative and regulatory changes to the insurance industry, including the progress of the bill recently introduced to the House of Representatives and Senate that would require Medigap insurers to have a required minimum loss ratio, which could result in margin compression.

Factors that could result in a positive rating action include: full integration into Aetna Inc.'s strategic plan including utilization of the Aetna Inc. brand name as well as CLIC and ACIC's becoming significant contributors to the parent's earnings.

Factors that could result in a negative rating action include: lack of future parental support; less of a focus on the Medicare Supplement business on a corporate (Aetna Inc.) basis; significant deterioration of the operating performance of the individual entities or the potential impact of proposed legislative changes to the Medicare system.

The principal methodology used in determining these ratings is Best's Credit Rating Methodology - Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best's rating process and highlights the different rating criteria employed. Additional key criteria utilized include: "Rating Health Insurance Companies"; "Understanding BCAR for Life/Health Insurers"; "Rating Members of Insurance Groups"; "Risk Management and the Rating Process for Insurance Companies"; and "Assessing Country Risk." Methodologies can be found at

Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.

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