A.M. Best Affirms Ratings of CUNA Mutual Financial Group, Inc.’s Life Subsidiaries
December 17, 2013 by Business Wire
OLDWICK, N.J.–(BUSINESS WIRE)–
A.M. Best Co. has affirmed the financial strength ratings (FSR) of A (Excellent) and issuer credit ratings (ICR) of “a” of CMFG Life Insurance Company (CMFG Life) and MEMBERS Life Insurance Company (MLIC), a life/annuity subsidiary, as well as the following property/casualty subsidiaries: CUMIS Insurance Society, Inc., its wholly owned subsidiary, CUMIS Specialty Insurance Company, Inc., Producers Agriculture Insurance Company and its 100% reinsured affiliate, Producers Lloyds Insurance Company (both of Amarillo, TX) (collectively, all four companies are referred to as CUMIS). A.M. Best also has affirmed the debt rating of “bbb+” on the $85 million, 8.50% 20-year surplus note issued by CMFG Life. The outlook for all ratings is stable. The ultimate parent for all companies is CUNA Mutual Holding Company. All companies are headquartered in Madison, WI, unless otherwise specified.
The rating affirmations reflect CMFG Life’s continued position as the leading provider of life/health insurance products to members and employees of credit unions, its more than adequate risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), consistently strong operating results and its strategic initiatives to grow ancillary lines of business, providing product and revenue diversification outside the credit union marketplace.
Mitigating some of these strengths are CMFG Life’s volatility in statutory earnings performance in some of its business lines, its declining premium trends over the last few years, partly due to strategically exiting non- core lines of business and remaining, albeit reduced, exposure to structured securities and realized losses from investments.
CMFG Life’s ratings are extended to MLIC due to the strategic integration stemming from a reinsurance agreement. Under the coinsurance arrangement, MLIC ceded 95% of its previously in-force run-off business and is ceding 100% of the new modified guaranteed annuity product, introduced in August 2013, to CMFG Life.
The ratings for CUMIS recognize its favorable level of risk-adjusted capitalization, conservative balance sheet, overall operating profitability and well-established niche position in the credit union and multi-peril crop insurance segments. Partially offsetting these positive rating factors are the variability in CUMIS’ underwriting and investment results over the last five years, which resulted in fluctuating operating returns as well as pressure caused from general macroeconomic trends.
A.M. Best believes CMFG Life and its entities are well positioned at their current rating levels. Factors that could lead to negative rating actions include a weakened competitive market position in the organization’s niche credit union market, unfavorable operating performance or deterioration of the investment portfolio, which leads to a decline in absolute and risk-adjusted capital within each operating entity.
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. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.
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