Best’s News & Research Service - October 08, 2019 03:19 PM (EDT)
AM Best Removes From Under Review with Positive Implications, Upgrades Credit Ratings of Cincinnati Equitable Life Insurance Co
- October 08, 2019 03:19 PM (EDT)
Oldwick //BestWire// - AM Best has removed from under review with positive implications and upgraded the Financial Strength Rating (FSR) to B++ (Good) from B+ (Good) and the Long-Term Issuer Credit Rating (Long-Term ICR) to “bbb+” from “bbb-” of Cincinnati Equitable Life Insurance Company (CELIC) (Cincinnati, OH). The outlook assigned to these Credit Ratings (ratings) is stable.
The ratings reflect CELIC’s balance sheet strength, which AM Best categorizes as strong, as well as its marginal operating performance, limited business profile, appropriate enterprise risk management (ERM) and the strength and support of its new affiliate, the Michigan Farm Bureau Group.
On Sept. 30, 2019, CELIC was acquired by the Michigan Farm Bureau Financial Corporation. CELIC’s balance sheet strength assessment was determined by AM Best to be strong, reflecting strong asset quality and a strong liquidity position, although CELIC does have a relatively low level of absolute capital, along with limited stand-alone financial flexibility.
CELIC’s statutory net income has exhibited a declining trend, driven by higher death claims and reserving within the ordinary life book of business. AM Best expects that CELIC’s operating performance will benefit under new ownership, as the acquiring company could potentially help CELIC improve the net yield on its investments. Since the focus of the company has moved away from health insurance business to ordinary life, the company has been able to generate favorable premium growth, but this growth has led to increased new business expense strain.
The partial rating enhancement received by CELIC reflects the financial strength and support of its new affiliate, the Michigan Farm Bureau Group. It also reflects the expected integration of several corporate functions such as tax reporting, actuarial services, investment management and ERM. Rating enhancement is limited by the absence of any material explicit support in the form of capital contributions and/or guarantees, as well as by the fact that CELIC’s operations are not currently material to the overall insurance operations of the Michigan Farm Bureau. AM Best will continue to monitor the integration of this acquisition after the closing date to ensure the company is achieving its planned financial and strategic objectives.
This press release relates to Credit Ratings that have been published on AM 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 AM 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 AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
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