Credit rating agency A.M. Best Co. has revised upwards the
issuer credit ratings (ICR) on the life/health insurance
CNO Financial Group, Inc.
) to "bbb+" from "bbb" and the ICR and existing debt ratings
to "bb+" from "bb." The ratings carry a positive outlook.
Additionally, the financial strength rating (FSR) has been
affirmed at "B++" and the corresponding outlook has been upped to
positive from stable. However, this news failed to drive the
company's shares owing to broader market conditions. The stock
price fell 1.3% in the last trading session to close at $16.83 on
Aug 15, 2014.
The ICR ratings upgrade came on the back of CNO Financial's
strong premium growth and risk-adjusted capitalization, and the
company's execution of strategic business plans. The impressive
operating results that were largely attributable to growth in
revenues and cost containment measures also accounted for the
The ratings agency stated that all these, along with the
consistent investment performance, helped CNO Financial improve its
risk-adjusted capitalization, particularly in its leading operating
entity, Bankers Life and Casualty Company. Business strategies
executed by the company included divestiture of Conseo Life
Insurance Company (CLIC) and the closed block of interest sensitive
life and annuity products to Wilton Reassurance Company, and
reinsurance of certain legacy blocks of long-term care (LTC) to
Beechwood Re Ltd.
The rating on CNO Financial also took into account the adjusted
financial leverage (that has stayed below 20% since the debt
restructuring) and interest coverage (that benefited from the
current debt amortization).
However, despite the above-mentioned positives, A.M. Best noted
that the drop in new business premiums in some of the businesses
like Bankers Life's Medicare supplement, critical illness and LTC
product lines raise caution. The ratings agency has held the change
in market demand toward short-term care products and reduced
benefits, largely responsible for the decline in LTC premiums. On
the other hand, the decrease in premiums in the Bankers Life's
other health products are owing to the dearth of agent growth, as
per A.M. Best.
The credit rating giant has mentioned a couple of factors that
could prompt an upgrade in the ratings of CNO Financial. These
include continued diversification in business mix due to premium
growth in core operations and consistent rise in capital and
earnings. However, the ratings are subject to a downgrade if CNO
Financial suffers from deterioration in risk-adjusted
capitalization or significant operating or realized losses.
Rating affirmations or upgrades play an important part in
retaining investors' confidence on the stock as well as maintaining
creditworthiness in the market. We believe that CNO Financial's
present score with the credit rating agency will help it write more
business going forward.
At present, CNO Financial carries a Zacks Rank #3 (Hold).
Better-ranked stocks that warrant a look in the multi-line
insurance space include FBL Financial Group Inc. (
), Fortegra Financial Corp. (
) and Radian Group Inc. (
). All three stocks have a Zacks Rank #2 (Buy).
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CNO FINL GRP (CNO): Free Stock Analysis Report
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FORTEGA FIN CP (FRF): Free Stock Analysis
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