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Best’s News & Research Service - May 07, 2014 02:08 PM (EDT)

A.M. Best Revises Outlook to Positive for Catholic Order of Foresters

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Oldwick //BestWire// - A.M. Best has revised the outlook to positive from stable and affirmed the financial strength rating of B++ (Good) and issuer credit rating of "bbb+" of Catholic Order of Foresters (COF) (Naperville, IL).

The revised outlook reflects COF's trends of consistently positive statutory operating results, favorable growth in the society's unassigned funds in recent years, steady increases in its ordinary life premiums and its more than adequate level of risk-adjusted capitalization. Additionally, the Order has maintained favorable interest spreads on its fixed annuity line of business, supporting consistently positive net operating gains while strategically reducing new fixed annuity sales to mitigate effect of the current low interest rate environment.

The ratings reflect COF's well-established fraternal position with a large membership base and an active fraternal lodge system. The Order has consistently reported statutory operating gains, (on both its life and annuity lines of business) which have supported favorable trends in capital growth.

Partially offsetting these positive rating factors are challenges to grow life premiums in a highly competitive life insurance marketplace and COF's exposure to high guaranteed crediting rates on its annuity business and the associated risk of spread compression. Although annuity production has been strategically reduced in recent years, just over half of the Order's total reserves are allocated to this line of business. Additionally, a high proportion of these policies have a high minimum guaranteed crediting rate, exposing COF to spread compression if the low interest rate environment persists.

An upgrading of the ratings is contingent upon profitable growth trends in COF's ordinary life premiums, continued management of its annuity deposits with crediting rate spreads and improvements in risk-adjusted capitalization. Factors that could lead to negative rating actions include a material decline in the society's ordinary life premiums, unfavorable trends in its operating results and deterioration within its investment portfolio, all which could lead to a decline in 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

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

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