OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has affirmed the financial strength rating of A (Excellent) and the 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. (CUMIS) and its wholly owned subsidiary, CUMIS Specialty Insurance Company, Inc. (CUMIS Specialty). Concurrently, A.M. Best has assigned an ICR of ‘bbb’ to CUNA Mutual Financial Group, Inc., an intermediate holding company within the group. Additionally, 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 operating companies are domiciled in Waverly, IA, but are headquartered in Madison, WI.
The rating affirmations reflect CMFG Life’s position as the leading provider of insurance and financial services products to credit unions, their employees and members, strategic changes to the organizational structure to improve capital flexibility, prudent capital management and reduction in investment risk. Financial leverage is modest with strong interest coverage. Partially offsetting these strengths are the volatility in statutory earnings within some core lines of business and an increased concentration of the business profile due to ongoing divestitures of non-core business units and product lines in recent years.
CMFG Life’s ratings are extended to MLIC due to the strategic integration stemming from a reinsurance agreement. Under the coinsurance arrangement, CMFG Life assumes 95% of MLIC’s previously in-force life business and assumes 100% of a modified guaranteed annuity product and a deferred income annuity product recently introduced in 2014.
The ratings for CUMIS and CUMIS Specialty recognize their favorable level of risk-adjusted capitalization, conservative balance sheet, overall operating profitability and well-established niche position in the credit union segment. Partially offsetting these positive rating factors is the variability in underwriting results over the past five years, which resulted in fluctuations in operating returns, as well as pressure caused from general macroeconomic trends earlier in the period. Producers Agriculture Insurance Company and its 100% reinsured affiliate, Producers Lloyds Insurance Company (both of Amarillo, TX), which were previously rated with the property/casualty entities, were acquired by HCC Insurance Holdings, Inc. effective Jan. 1, 2015.
Positive rating action for CMFG Life and its entities is unlikely in the near term. Factors that could lead to negative rating actions include a weakened competitive market position in the organization’s niche credit union market, unfavorable operating trends in premiums or earnings, or a material decline in risk-adjusted capitalization.
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.
Key insurance criteria reports utilized:
• A.M. Best's Liquidity Model for U.S. Life Insurers
• A.M. Best's Perspective on Operating Leverage
• Analyzing Insurance Holding Company Liquidity
• Catastrophe Analysis in A.M. Best Ratings
• Equity Credit for Hybrid Securities
• Evaluating Country Risk
• Evaluating U.S. Surplus Notes
• Insurance Holding Company and Debt Ratings
• Rating Members of Insurance Groups
• Risk Management and the Rating Process for Insurance Companies
• The Treatment of Terrorism Risk in the Rating Evaluation
• Understanding BCAR for U.S. and Canadian Life/Health Insurers
• Understanding BCAR for Property/Casualty Insurers
• Understanding Universal BCAR
This press release relates to rating(s) 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 visit A.M. Best’s Ratings & Criteria Center.
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