Best’s News & Research Service - February 28, 2023 09:57 AM (EST)
AM Best Maintains Under Review with Developing Implications Status for Credit Ratings of Members of Columbian Financial Group
- February 28, 2023 09:57 AM (EST)
Oldwick //BestWire// - AM Best has maintained the under review with developing implications status for the Financial Strength Rating of B (Fair) and the Long-Term Issuer Credit Ratings of “bb+” (Fair) of Columbian Mutual Life Insurance Company (Columbian) (Binghamton, NY) and Columbian Life Insurance Company (Chicago, IL), collectively referred to as Columbian Financial Group (CFG).
The Credit Ratings (ratings) reflect CFG’s balance sheet strength, which AM Best assesses as adequate, as well as its marginal operating performance, neutral business profile and appropriate enterprise risk management.
The Credit Ratings (ratings) were put under review with developing implications shortly after CFG’s announcement on June 29, 2021, that its board of directors had approved a strategic transaction with Constellation Insurance Holdings, Inc. (Constellation) that includes the sponsored demutualization of Columbian to a stock company with the issuance of all newly issued stock to Constellation. Constellation is an insurance holding company backed by two large Canadian institutional investors primarily engaged in the management of pension plans, Caisse de Dépôt et Placement du Québec and Ontario Teachers’ Pension Plan Board. The transaction provides for Constellation to invest up to $100 million to fund cash payments to eligible policyholders and significantly strengthen the capitalization of Columbian. The acquisition of Columbian by Constellation will provide Columbian needed capital support from a substantially larger organization while maintaining its brand, management team and headquarters.
Despite an expected positive impact on capital from the planned transaction with Constellation, the ratings will remain under review with developing implications until all approvals are finalized, the transaction closes and AM Best evaluates the overall impact. The anticipated closing date is during the second quarter of 2023. Until that time, AM Best will monitor the potential for continued pressure on Columbian’s risk-adjusted capitalization primarily from the effects of the COVID-19 pandemic on the senior market. In the interim, negative rating actions on CFG are possible if its risk-adjusted capitalization continues to decline prior to close of the transaction. Prior-year capital declines have stemmed largely from the impact of the COVID-19 pandemic on life insurance claims, traditionally lower interest rates on the valuation of CFG’s pension plan liability and a deferred income tax adjustment from the implementation of the 2017 Tax Cut and Jobs Act. AM Best notes that while there is potential for CFG’s pension plan to be a further drag on capitalization in the future, definitive steps were taken to immunize the pension plan liability from further volatility in 2020 and it since has become a less material factor.
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.