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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - MAY 15, 2012 12:00 AM (EDT)
A.M. Best Co. has upgraded the financial strength rating to A- (Excellent) from B++ (Good) and issuer credit ratings to “a-” from “bbb+” of Central States Health & Life Co. of Omaha (CSO) (Omaha, NE) and its subsidiaries, Censtat Life Assurance Company (Censtat Life) (Phoenix, AZ) and Censtat Casualty Company (Censtat Casualty) (Omaha, NE). The outlook for all ratings is stable.
The rating upgrades for CSO reflect its improved market share position within its core credit insurance products, favorable risk-adjusted capitalization, positive operating earnings and continued solid execution of growth and geographic diversification through core alliances. CSO has elevated itself to the fourth-largest writer of credit life and credit disability insurance based on direct written premiums through year-end 2010, which represents a robust period of growth from a number 10 ranking just four years ago. CSO is well positioned to continue its market share growth given itsrecent history of forming strategic alliances with traditional credit insurance writers in the auto dealer market, including its 2012 alliance with American Heritage Life Insurance Company/Allstate Dealers Services (AHL).
CSO’s risk-adjusted capitalization has remained excellent over recent years, supported by favorable earnings trends derived from its core credit insurance products, with a smaller contribution from its ordinary life insurance block. A.M. Best believes the company’s future earnings will be further enhanced via fee income given that CSO also will administer AHL’s existing block of creditor business.
The company has a well-established presence in the auto dealership, community and regional bank and credit union markets while operating over a wide geographic region. This is not common for many competitors in the credit market, which are typically mono-state or concentrated in certain regions of the country. CSO remains committed to expanding its debt protection operations, including both its traditional credit insurance and debt cancellation products. While recognizing that future growth may be impacted by the strength of the economy and associated auto sales, A.M. Best believes recent alliances and its strong geographical presence in the marketplace should benefit CSO as it executes its growth strategy in this competitive marketplace.
The rating upgrades for Censtat Life recognize its integration into CSO’s strategic plan and operations as it functions as a reinsurer for the parent. The ratings also are based on its favorable capitalization levels and positive earnings.
The rating upgrades for Censtat Casualty acknowledge its strong risk-adjusted capitalization and implicit support from CSO. These positive rating factors are somewhat offset by the company’s limited product diversification and execution risk associated with implementing a business plan within the current regulatory and legislative environment.
A.M. Best believes CSO is well positioned at its current rating level for the foreseeable future. Factors that could result in negative rating actions include a significant decline in risk-adjusted capitalization as measured by Best’s Capital Adequacy Ratio (BCAR) model or net operating performance that does not meet A.M. Best’s expectations.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Key criteria utilized includes: “Rating Members of Insurance Groups.” Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source.