OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of A+ (Superior) and the Long-Term Issuer Credit Rating of “aa” (Superior) of Knights of Columbus (the Order) (New Haven, CT). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect the Order’s balance sheet strength, which AM Best assesses as strongest, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management.
The ratings also reflect the absolute and strongest-assessed risk-adjusted capitalization, as measured by Best Capital Adequacy Ratio (BCAR). Quality of surplus is good, with low use of reinsurance, no financial leverage, and a highly diversified-invested asset base of overall good credit quality. The Order has reported generally stable earnings trends, supported by strong underwriting, which has led to favorable mortality. Persistency is supported by its member base, which has proven to be very loyal. Earnings were impacted somewhat by higher mortality brought on by the COVID-19 pandemic, as well as the challenges in marketing to its members. The Order’s product offerings, which are mostly ordinary life products, generally are considered less risky and more creditworthy. Disability income and long-term care coverages, are offered with the assistance of third-party administrators and are reinsured. In recent years, the Order has developed its asset management business with mutual funds that are managed consistent with Catholic values, with assets under management of over $1 billion.
Partially mitigating factors include higher allocations to less liquid asset classes, such as alternative assets and private placements. The Order pays a substantial amount of its earnings as dividends to its members; as a result, statutory return ratios are low compared with the life industry average. Lastly, the Order operates in markets that can be highly competitive, such as the ordinary life and individual annuity markets.
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