Best’s News & Research Service - August 15, 2017 03:09 PM (EDT)
A.M. Best Upgrades Credit Ratings of Catholic Order of Foresters
- August 15, 2017 03:09 PM (EDT)
Oldwick //BestWire// - A.M. Best has upgraded the Financial Strength Rating (FSR) to A- (Excellent) from B++ (Good) and the Long-Term Issuer Credit Rating (Long-Term ICR) to “a-” from “bbb+” of Catholic Order of Foresters (COF) (Naperville, IL). The outlook of these Credit Ratings (ratings) has been revised to stable from positive.
The rating upgrades are based on the overall credit quality of COF’s balance sheet, with an adequate level of risk-adjusted capitalization, good overall diversification of its investment portfolio, emphasis on whole life products and low but prudent utilization of reinsurance. The rating upgrades also recognize prudent management of its discontinued long-term care (LTC) block through reinsurance, rate actions, claims administration and stress testing, along with favorable cash flow testing results. COF’s enterprise risk management capabilities are commensurate with its risk profile, and there has been improvement in its internal corporate governance practices. Finally, COF enjoys a favorable portfolio yield relative to industry benchmarks, along with good liquidity resources and historically generally favorable operating trends despite some one-time charges reflected in its 2016 results.
These positive rating factors are partially offset by a significant percentage of reserves that remain interest sensitive, a high percentage of ordinary life products sold on a single-premium basis, ongoing challenges in managing its LTC block and a higher concentration in riskier asset classes (i.e., common stock, below investment grade bonds and mortgages) relative to capital. Additionally, there is some concentration within structured securities, which include collateralized loan obligations, commercial mortgage-backed securities, asset-backed securities and mortgage-backed securities, although COF is actively managing this exposure. Finally, COF’s business profile remains regionally concentrated, with the majority of business generated in the Midwest.
Negative rating action may occur if COF sustains a significant decline in capitalization due to other operating losses or other than temporarily impaired asset write-downs. A negative rating action also may occur if there is deterioration in operating performance.
This press release relates to Credit Ratings 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. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.
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