A.M. Best Revises Outlook to Negative for the Members of Columbian Financial Group [Manufacturing Close – Up]

Proquest LLC

A.M. Best Co. has revised the outlook to negative from stable and affirmed the financial strength rating of A- (Excellent) and issuer credit ratings of "a-" of Columbian Mutual Life Insurance Company (CML) and Columbian Life Insurance Company (CLIC). CML and CLIC are the integral members of Columbian Financial Group (CFG) and are headquartered in Binghamton, NY.

The negative outlook reflects the significant decline in CFG's risk-adjusted capitalization as measured by Best's Capital Adequacy Ratio (BCAR) model and its net operating losses recorded in recent periods. These negative trends are primarily the result of a substantial increase in CFG's pension liability due to the low interest rate environment, numerous one-time events and the impact from increased costs associated with new business sales. While the group has taken measures to mitigate some of these concerns, including a capital relief reinsurance transaction and a strategic decision to reduce its premium growth rate (in order to preserve capital), A.M. Best believes that CFG will be challenged to generate the operating earnings necessary to support new business growth and materially improve its current risk-adjusted capital position.

The rating affirmations for CFG reflect its current adequate level of risk-adjusted capital for its business and investment risks, its relatively creditworthy liability profile of primarily low face amount ordinary life insurance policies, its successful unified marketing approach in its niche target markets and relatively conservative investment portfolio. While A.M. Best believes that the organization will be challenged to meaningfully improve its operating results over the near term, CFG's earnings and capital position could be favorably impacted if interest rates continue to rise at a moderate pace.

A reversal of the outlook could occur if CFG significantly improves its operating performance while increasing its risk- adjusted capital position. Key factors that could result in additional negative rating actions for CFG include a further decline in its risk-adjusted capitalization or net operating performance that does not meet A.M. Best's expectations.

The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides an explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process.

A.M. Best Company is an insurance rating and information source.