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Best’s News & Research Service - May 18, 2016 03:40 PM (EDT)

A.M. Best Downgrades Ratings of North Carolina Mutual Life Insurance Company

  • May 18, 2016 03:40 PM (EDT)
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Oldwick //BestWire// - A.M. Best has downgraded the financial strength rating to C++ (Marginal) from B (Fair) and the issuer credit rating to “b+” from “bb+” of North Carolina Mutual Life Insurance Company (NC Mutual) (Durham, NC). The outlook for each rating is stable.

The rating actions reflect NC Mutual’s significant decline in absolute capital for 2015 at $9.2 million, compared with $17.9 million for 2014, and risk-adjusted capitalization at approximately 388% for 2015, compared with 674% in 2014. Historically, the company’s risk-adjusted capitalization has been volatile. The decline in capital is primarily due to its operating loss of $4.3 million for 2015, due to unfavorable mortality results relating to its group insurance line of business, in addition to one-time expenses for severance relating to a change in management and retiring senior officers.

Partially offsetting these negative rating factors are NC Mutual’s continued focus on its new business model, a number of fee-based initiatives and a reduction in operating expenses, which are expected to add to its reported income in future periods. Additionally, the company is actively working on expanding its top line revenue from general agency fees on several products, including property and casualty products. Another positive factor is that the company has implemented new technology for its administrative process and plans to use this new application to generate administrative service revenue.

Additional negative rating actions could occur should there be a continued deterioration in NC Mutual’s operating results or risk-adjusted capitalization. While near-to-medium term improvements in the company’s current rating level are not likely, A.M. Best’s expects the company to improve its risk-adjusted capitalization and operating results, demonstrate positive trends over the next two to three years, and create a sustainable business model.

This press release relates to rating(s) that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page.

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

North Carolina Financial Strength Mutual Insurers Life Insurers Press Release A.M. Best Rating Services, Inc. Insurance Issuer Credit Rating Best's Credit Rating Action Rating Event

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