A.M. Best Upgrades Issuer Credit Ratings of CNO Financial Group, Inc. and Its Life/Health Subsidiaries
August 14 2014 - 2:41PM
Business Wire
A.M. Best has upgraded the issuer credit ratings (ICR) to
“bbb+” from “bbb” with a positive outlook for the life/health
subsidiaries of CNO Financial Group, Inc. (CNO Financial)
(Carmel, IN) [NYSE:CNO]. Concurrently, A.M. Best has affirmed the
financial strength rating (FSR) of B++ (Good) with a revision in
the outlook to positive from stable. A.M. Best has also upgraded
the ICR and existing senior debt rating to “bb+” from “bb” of CNO
Financial with a positive outlook. (See below for a detailed
listing of the companies and ratings.)
The ICR upgrades reflect the continuing favorable trends in CNO
Financial’s overall premium growth and risk-adjusted
capitalization. In addition, A.M. Best acknowledges CNO Financial’s
ongoing success in executing its strategic business plan. CNO
Financial continues to report premium growth in its life and
annuity business segments, enabled in part by the addition of new
office locations and improved agent productivity. Its enhanced
operating results have been attributable to the growth in revenue
in its life/health insurance subsidiaries, as well as its ongoing
expense management. Improved revenue across several business
segments, especially its life products, has been driven by agent
growth, timely rate increases, the introduction of new products and
the modification of some existing products. The premium growth and
enhanced operating results, combined with its consistent investment
performance, has resulted in improved risk-adjusted capitalization
for the insurance operating companies. A.M. Best notes that
Bankers Life and Casualty Company (Bankers Life) (Chicago,
IL), the group’s lead operating entity, has seen considerable
improvement in its risk-adjusted capitalization over the past few
years.
The ratings also reflect the success CNO Financial has had in
executing its business strategy, which included
exiting/de-emphasizing non-core product lines through divestiture
and reinsurance. This included the sale of Conseco Life
Insurance Company and its closed block of interest-sensitive
life and annuity products to Wilton Reassurance Company and
reinsuring some of its legacy blocks of long-term care (LTC) to
Beechwood Re Ltd, both announced earlier this year. The business
strategy also included building its distribution, reducing expenses
and focusing on markets where true competitive advantages are
achievable while, at the same time, actively managing risk.
CNO Financial’s adjusted financial leverage has remained under
20% since its debt restructuring. Financial leverage continues to
improve due to its scheduled debt amortization. The organization’s
interest coverage has also benefited from the ongoing amortization
of debt. Both ratios remain well within A.M. Best’s guidelines for
the organization’s current ratings.
While CNO Financial’s life insurance and annuity sales have
generally increased, A.M. Best has observed declining new business
premium trends within some of its core lines of business, including
Bankers Life’s Medicare supplement, critical illness and LTC
product lines. A.M. Best notes that the decline in LTC premium is
largely a function of an overall market shift to short-term care
products, in addition to offering reduced benefits, including the
elimination of lifetime benefits, for newly issued long-term care
policies. However, the premium decrease in Bankers Life’s other
health products is partially attributable to the lack of agent
growth. While agent productivity continues to improve, agents’
headcount has recently become stagnant. A.M. Best notes that growth
in life and annuity new business premiums, the latter of which is
primarily driven by indexed annuities, has been able to offset the
decrease in health sales during the first half of the year.
Factors that could result in favorable rating actions for CNO
Financial and its life/health operating companies over the near to
medium term include continued diversification in business mix
driven by premium growth in its core lines of business, together
with sustained earnings and capital growth. Factors that could lead
to negative rating actions include significant deterioration in
risk-adjusted capitalization and/or sizable operating or realized
losses.
The FSR of B++ (Good) has been affirmed and the ICRs have been
upgraded to “bbb+” from “bbb” for the following key life/health
subsidiaries of CNO Financial Group, Inc.:
- Bankers Life and Casualty
Company
- Colonial Penn Life Insurance
Company
- Bankers Conseco Life Insurance
Company
- Washington National Insurance
Company
The following debt rating has been upgraded:
CNO Financial Group, Inc.—-- “bb+” on $275 million 6.375%
senior secured notes, due 2020
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.
Copyright © 2014 by A.M. Best Company,
Inc. ALL RIGHTS RESERVED.
A.M. BestTom Zitelli, 908-439-2200, ext. 5412Senior Financial
Analysttom.zitelli@ambest.comorTom Rosendale, 908-439-2200, ext.
5201Assistant Vice
Presidentthomas.rosendale@ambest.comorChristopher Sharkey,
908-439-2200, ext. 5159christopher.sharkey@ambest.comorJim Peavy,
908-439-2200, ext. 5644Assistant Vice President, Public
Relationsjames.peavy@ambest.com
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