A.M. Best Co. revised the issuer credit ratings ("ICR") and
existing senior debt ratings upwards to "bb" from "bb-" of
CNO Financial Group Inc.
). Additionally, the rating agency upgraded the financial strength
rating ("FSR") to B++ (Good) from B+ (Good) and ICR to 'bbb' from
'bbb-' for the primary life/health subsidiaries of CNO Financial
The outlook for the ratings is stable.
Concurrently, A.M. Best provided a debt rating of "bb" with stable
outlook to the upcoming issuance of $250 million senior secured
notes due 2020.
The rating upgrades came on the back of CNO Financial's solid
operational profitability, core product sales and risk-adjusted
capitalization. While diverse revenue avenues from its insurance
subsidiaries have continued to drive earnings improvement, increase
in agents, rate increase and new products fuel higher revenues.
The rating agency, however, expects continued low interest rates to
weigh on the annuity sales in the near to medium term.
A.M. Best noted that solid risk-adjusted capitalization of the
insurance subsidiaries have been aided by CNO Financial's better
operating results and investment results. Bankers Life and Casualty
Company, the leading subsidiary, has been experiencing improving
capitalization for quite some time now.
The rating action also incorporates the company's initiatives to
exit non-core business, cost containment and establish a
The rating agency remains cautious despite the de-risking of the
company's investment portfolio, as asset impairments are likely
owing to the exposure to commercial mortgages, commercial
mortgage-backed securities and below investment grade bonds.
Further, A.M. Best reiterated the FSR of B- (Fair) and ICR of "bb-"
of Conseco Life Insurance Company ("CLIC") with a stable outlook.
The rating affirmation reflects CLIC's moderate operating
profitability and better risk-adjusted capitalization, partially
offset by lower premiums and net investment income. A.M. Best
expects CNO Financial's legacy blocks of business to be supervised
effectively to aid profitability. The rating agency also remains
unsure of CNO Financial's role in CLIC.
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. On the other
hand, rating downgrade adversely affects the business, besides
increasing cost of future debt issuances. We believe strong
scorings with rating agencies will help it write more business
In July, A.M. Best conferred a rating of "a-" on senior debt,
"bbb+" on subordinated debt and "bbb" on preferred stock of
), a close competitor of CNO Financial Group. The rating agency
also provided a debt rating of "a-" to the newly issued $250
million 2.65% senior unsecured notes due 2017 of
CNO Financial Group holds a Zacks Rank #1 (Strong Buy), indicating
an upward boost on the shares over the near term.
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