A.M. Best Affirms Credit Ratings of CNO Financial Group, Inc. and Its Life/Health Subsidiaries
February 08 2017 - 11:58AM
Business Wire
A.M. Best has affirmed the Financial Strength Ratings
(FSR) of A- (Excellent) and the Long-Term Issuer Credit Ratings
(Long-Term ICR) of “a-” of the life/health subsidiaries of CNO
Financial Group, Inc. (CNO Financial) (headquartered in Carmel,
IN) [NYSE: CNO]. Concurrently, A.M. Best has affirmed the Long-Term
ICR and the Long-Term Issue Credit Ratings (Long-Term IR) of “bbb-”
of CNO Financial. The outlook of these Credit Ratings (ratings) is
stable. (See below for a detailed listing of the companies and
ratings.)
The ratings reflect the maintenance of strong operating earnings
and profitability ratios, premium growth, and favorable levels of
risk-adjusted capitalization, despite the recent one-time impact of
the Beechwood Re Ltd. (Beechwood) long-term care (LTC) recapture,
which occurred in late 2016. While CNO Financial reported an
operating loss for third-quarter 2016 due largely to costs
associated with the Beechwood transaction, this was offset by
another one-time item, related to the settlement of an IRS dispute,
which positively impacted fourth-quarter results. Combined with
strong underlying operating results in the quarter, CNO Financial
reported favorable operating results for the full year ending
December 2016. CNO Financial also reported strong profitability
ratios, which are attributable to a combination of growth in
revenue at its core life/health insurance subsidiaries and its
ongoing expense management initiatives. Continued earnings and
lower dividend obligations also have contributed to strong
risk-adjusted capital ratios on a consolidated basis, as well as
for the individual core 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 in
recent years. Furthermore, the operating subsidiaries’
capitalization has benefited from capital support from CNO
Financial when needed.
CNO Financial’s adjusted financial leverage ratio remains
appropriate at just over 20% and has not changed much since the
completion of its recapitalization plan several years ago. Despite
the modest increase in leverage at that time, A.M. Best notes that
the company’s financial leverage and interest coverage ratios
remain within A.M. Best’s guidelines for its current ratings. A.M.
Best would like to see interest coverage stay in a minimum range of
3 to 5 times. While CNO Financial typically has maintained
more-than-adequate holding company liquidity, A.M. Best notes that
liquidity was strained somewhat in the last half of 2016. This was
the result of the company managing through the Beechwood recapture,
and the strategic capital/cash management required to support asset
write-downs and capital bolstering requirements at its insurance
subsidiaries. This led to a temporary reduction in holding company
cash, as well as the suspension of CNO Financial’s stock repurchase
program and dividends from some subsidiaries to the holding
company. A.M. Best notes that the organization continued to hold
adequate cash for management of interest expenses and general
corporate expenses during this time, and that the cash position
normalized somewhat by year-end 2016.
Finally, while CNO Financial’s annuity and life insurance sales
generally have increased, A.M. Best notes the continued lower new
business premium trends in some of its core lines of business,
including the Medicare supplement and LTC product lines. A.M. Best
recognizes the decline in LTC premium is largely a function of the
company’s shift to short-term care products, in addition to
offering reduced benefits. However, the premium decrease in Bankers
Life’s other health products is attributable partially to the low
agent growth, in the low, single digit range. While agent
productivity has improved, agent headcount has remained relatively
stagnant for several years. A.M. Best notes that growth in annuity
premiums, which is driven primarily by indexed annuities, has been
able to mostly offset the decrease in health sales at Bankers Life
during recent periods. Furthermore, individual and group accident
and health product premium has increased somewhat at Colonial
Penn Life Insurance Company and Washington National
Insurance Company, and combined have allowed CNO Financial to
report good overall consolidated premium growth across its brands
and product offerings.
The FSRs have been affirmed at A- (Excellent) and the Long-Term
ICRs have been affirmed at “a-” 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 Long-Term IRs have been affirmed:
CNO Financial Group, Inc.—
-- “bbb-” on $325 million 4.50% senior unsecured notes, due
2020
-- “bbb-” on $500 million 5.25% senior unsecured notes, due
2025
This press release relates to Credit Ratings that have been
published on A.M. 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 A.M.
Best’s Recent Rating Activity web page. For
additional information regarding the use and limitations of Credit
Rating opinions, please view Understanding Best’s Credit
Ratings.
A.M. Best is the world’s oldest and most authoritative
insurance rating and information source. For more information,
visit www.ambest.com.
Copyright © 2017 by A.M. Best Rating
Services, Inc. and/or its subsidiaries. ALL RIGHTS
RESERVED.
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version on businesswire.com: http://www.businesswire.com/news/home/20170208005865/en/
A.M. BestJoseph Zazzera, MBA, +1-908-439-2200, ext.
5797Directorjoseph.zazzera@ambest.comorKen
Johnson, CFA, CAIA, FRM, +1-908-439-2200, ext. 5056Senior
Directorken.johnson@ambest.comorChristopher Sharkey,
+1-908-439-2200, ext. 5159Manager, Public
Relationschristopher.sharkey@ambest.comorJim Peavy,
+1-908-439-2200, ext. 5644Director, Public
Relationsjames.peavy@ambest.com
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