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Best’s News & Research Service - October 07, 2022 10:19 AM (EDT)

AM Best Downgrades Credit Ratings of Catholic Order of Foresters

  • October 07, 2022 10:19 AM (EDT)
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Oldwick //BestWire// - AM Best has downgraded the Financial Strength Rating (FSR) to B++ (Good) from A- (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) to “bbb+” (Good) from “a-” (Excellent) of Catholic Order of Foresters (COF) (Naperville, IL). The outlook of these Credit Ratings (ratings) has been revised to stable from negative.

The ratings reflect COF’s balance sheet strength, which AM Best assesses as adequate as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

The rating downgrades are a result of the deterioration in COF’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), to a weak level for 2021 from a strong level in 2020; however, it is projected to improve to adequate for 2022. In 2021, capital declined primarily due to two subsidiaries coming through as non-admitted assets, coupled with a net loss for the year. Of the two non-admitted assets at year-end 2021, one subsidiary has been admitted recently, with the other anticipated to be admitted by year-end 2022, partially resolving recent capital volatility. Prior-year capital declines have stemmed largely from operating losses due to accounting changes related to income recognition in its small business loan interest-only strip holdings. The company also has been making investments in real estate entities, which have not yielded dividend earnings yet to the parent. The company has the ability to access additional capital; COF maintains a line of credit with a bank and has the capability to borrow from the Federal Home Loan Bank. The stable outlooks reflect the expectation that the company has reversed the negative trend in operating performance, and going forward, operating results will start to contribute favorably to organic capital growth.

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 Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.

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