AM Best Downgrades Credit Ratings of Members of Columbian Financial Group

OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has downgraded the Financial Strength Rating (FSR) to B (Fair) from B++ (Good) and the Long-Term Issuer Credit Ratings (Long-Term ICR) to “bb+” from “bbb” of Columbian Mutual Life Insurance Company (Binghamton, NY) and Columbian Life Insurance Company (Chicago, IL), collectively referred to as Columbian Financial Group (CFG). The outlook of the FSR has been revised to stable from negative while the outlook of the Long-Term ICR is negative.

These Credit Ratings (ratings) reflect CFG’s balance sheet strength, which AM Best assesses as adequate, as well as its marginal operating performance, neutral business profile and appropriate enterprise risk management. CFG focuses on the senior market with family solutions, pre-need, final expense and simplified issue term life insurance products. The group’s operations are conducted on a general agency plan in all 50 states, the District of Columbia and the U.S. Virgin Islands, with its core business focused mainly in small face amount life insurance markets with distribution through home sales, general agents and independent marketing organizations.

The downgrades reflect the declining trend in CFG’s capitalization over the previous three years with a substantial decline in 2020 due to the impact of the COVID-19 pandemic on the company’s financial results and a nonrecurring unclaimed property liability booked in the fourth quarter. Prior-year capital declines have largely stemmed from the impact of lower interest rates on the valuation of CFG’s pension plan liability and a deferred income tax adjustment from the implementation of the 2017 Tax Cut and Jobs Act. AM Best notes that while there is potential for CFG’s pension plan to be a further drag on capitalization in the future, definitive steps were taken to immunize the pension plan liability from further volatility in 2020 and hence it was not a factor in the most recent capital decline.

The negative outlook on the Long-Term ICR reflects the potential for additional operating losses in 2021, which could further weaken CFG’s balance sheet. AM Best will continue to monitor the group’s operating performance over the near term, given the impact that the ongoing pandemic has had on 2020 results.

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