Credit rating agency A.M. Best recently asserted the Financial Strength Rating (“FSR”) of A- (Excellent) and the Long-Term Issuer Credit Ratings (“Long-Term ICR”) of “a-” of CNO Financial Group, Inc.’s CNO life/health units. Moreover, AM Best affirmed CNO Financial’s Long-Term ICR and the Long-Term Issue Credit Ratings of “bbb-”. The outlook of these ratings remains stable.
Reasons Behind the Ratings
These ratings highlight the company’s solid balance sheet, impressive operating performance, neutral business profile and enterprise risk management. Per the credit rating giant, the company closed an indemnity coinsurance deal with a top counterparty wherein CNO Financial reinsured majority of its long-term care legacy business as part of its strategy. This consists of its pre-2003 issued comprehensive and nursing home long term care policies (LTC) policies.
The rating agency expects a reduction in morbidity and low tail risk due to the interest rate risk and policy holder behavioral pattern that the LTC policies are exposed to. The deal is expected to result in lower earnings volatility and related capital at risk.
Notably, CNO Financial has witnessed a consistent profitability ratio on the back of revenue growth, excellent investment returns and encouraging expense management initiatives. It is also aiming at maintaining pre-transaction and post-transaction risk-adjusted capitalization levels across its regulated insurance entities and on a consolidated basis. The company’s positive earnings trend and favorable premium growth across its core business lines have also supported the remarkable capital ratios. Risk-based capital requirements are likely to decrease owing to the relatively capital-intensive nature of the company’s LTC business.
Although the company’s leverage has slightly deteriorated, its financial leverage and interest coverage ratios remain in line with expectations, according to the credit rating agency noticed that.
The company’s first-year premium levels increased during last year, primarily on the back of solid indexed annuity sales growth, somewhat offset by lower premium trends in the Medicare supplement and LTC product lines.
Shares of this Zacks Rank #2 (Buy) company have lost 36.8%, wider than its industry’s decline of 22.1%.
Other Stocks to Consider
A few other top-ranked stocks from the multiline insurance sector are Cigna Corporation CI, MetLife, Inc. MET and Kemper Corporation KMPR. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Cigna is a health services organization, providing insurance and related products and services in the United States and around the globe. It carries a Zacks Rank of 2. In the trailing four reported quarters, the stock pulled off average positive surprise of 15.61%.
MetLife provides insurance, annuities, employee benefits and asset management businesses. The stock is a Zacks #2 Ranked player. It came up with average earnings surprise of 12.34% over the last four reported quarters.
Kemper is a diversified insurance holding company, offering property and casualty plus life and health insurance services in the United States. This Zacks Rank #1 player managed to deliver a whopping average trailing four-quarter beat of 90.78%.
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