On the back of strong ratings from credit rating agency A.M.
Best, share price of
CNO Financial Group Inc.
) went up 0.1% to $14.40 on Sep 30, 2013. On Sep 27, 2013, A.M.
Best Co. affirmed the issuer credit ratings (ICR) of "bbb" and
financial strength ratings of "B++" of the key life/health
subsidiaries of CNO Financial. Concurrently, the ratings agency
upgraded the outlook on the ICR to positive from stable while it
retained the stable outlook on FSR. Additionally the ICR of "bb"
on CNO Financial and the existing debt ratings have been affirmed
while revising the outlook to positive from stable.
The upward revision in the outlook of the ICRs and debt ratings
came on the back of the favorable trends in CNO Financial's
statutory operating earnings, risk-adjusted capitalization and
core life insurance sales. CNO Financial's impressive execution
of strategic business plans, which includes focus on advantageous
markets, divesting non-core businesses, curbing expenses,
recapitalization initiatives and proactive risk mitigations have
also added to the ratings revision.
A.M. Best also views favorably the debt restructuring by CNO
Financial that reduced cost of capital and improved the debt
maturity profile, thereby enhancing the financial flexibility of
the company. Furthermore, A.M. Best is of the opinion that CNO
Financial's profit maintaining capacity which goes to enhance
capital growth, strengthens the company's position in the credit
market compared to its peers. The debt-to-capital ratio of CNO
Financial that is below 20% is expected to decline further owing
to the scheduled amortization.
Nevertheless, A. M. Best recognizes the risk from the ongoing low
interest rate environment. The low interest rate environment that
is responsible for reducing net investment income is expected to
weigh on earnings sustainability of CNO Financial going forward.
A. M. Best stated that an upward revision in ratings is possible
in case of diversification in business mix, considerable growth
in risk-adjusted capitalization and continued earnings growth. On
the other hand, significant realized losses, operating losses or
deterioration in risk-adjusted capitalization might invite a
Rating affirmations or upgrades from credit rating agencies
play an important part in retaining investor confidence in 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.
CNO Financial currently carries a Zacks Rank #3 (Hold). Other
stocks that are worth considering are
Eastern Insurance Holdings Inc.
FBL Financial Group Inc.
). All the three stocks carry a favorable Zacks Rank #1 (Strong
AXA SA -SP ADR (AXAHY): Get Free Report
CNO FINL GRP (CNO): Free Stock Analysis
EASTERN INSURNC (EIHI): Free Stock Analysis
FBL FINL GRP-A (FFG): Free Stock Analysis
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