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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - DECEMBER 07, 2004 12:00 AM (EST)
A.M. Best Co. has downgraded the financial strength rating to B++ (Very Good) from A- (Excellent) of Central States Health & Life Company of Omaha (Central States) and its subsidiary, Censtat Life Assurance Company, both headquartered in Omaha, NE. The rating outlook remains negative.
This rating action is a result of continued negative trends in the operating results of Central States, culminating in a sizeable loss reported in the third quarter of 2004, which has caused some deterioration to the company's surplus. Over the past few years, results in Central States' Agency Division have been dramatically impacted by continued sizeable losses from its unlimited and high benefit cancer products. Worsening claims results have caused Central States to record a $9.6 million premium deficiency reserve in the third quarter of 2004. Central States is in the process of completing a reserve adequacy study, which A.M. Best believes could lead to another charge at year-end. The combination of these two charges will have a negative impact on the company's surplus position.
While Central States has implemented a number of remedial actions over the past few years, including considerable rate increases and conversion of numerous policyholders to lower benefit plans, these corrective measures were not enough to allow the company to turn around its cancer block to a breakeven profitability. Given the continued negative results in its cancer line of business, Central States is presently reviewing its options for improving the overall financial well being of the organization. A.M. Best believes that Central States will face numerous challenges in redeveloping its business strategy in the short term.
A.M. Best has maintained the negative outlook on Central States' rating as it will take some time for the organization to fully implement its corrective action plan and to reformulate its new market strategy going forward.
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A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source.