|[December 12, 2012]
A.M. Best Affirms Ratings of CMFG Life Insurance Company and Its Subsidiaries
OLDWICK, N.J. --(Business Wire)--
A.M. Best Co. has affirmed the financial strength rating (FSR) of
A (Excellent) and issuer credit rating (ICR) of "a" of CMFG Life
Insurance Company (CMFG Life). Additionally, A.M. Best has upgraded
the FSR to A (Excellent) from B++ (Good) and ICR to "a" from "bbb+" of MEMBERS
Life Insurance Company (MLIC), a subsidiary of CMFG Life. A.M. Best
also has affirmed the debt rating of "bbb+" on the $85 million, 8.50%
20-year surplus note issued by CMFG Life.
Concurrently, A.M. Best has affirmed the FSR of A (Excellent) and ICRs
of "a" for the following property/casualty subsidiaries of CMFG Life: CUMIS
Insurance Society, Inc., its wholly owned subsidiary, CUMIS
Specialty Insurance Company, Inc., Producers Agriculture
Insurance Company and its 100% reinsured affiliate, Producers
Lloyds Insurance Company (both of Amarillo, TX) (collectively, all
four companies are referred to as CUMIS). The ultimate parent for all
the above companies is CUNA Mutual Holding Company. The
outlook for all ratings is stable, and all companies are headquartered
in Madison, WI, unless otherwise specified.
The rating affirmations reflect CMFG Life's continued position as the
leading provider of life/health insurance products to members and
employees of credit unions, its more than adequate risk-adjusted
capitalization as measured by Best's Capital Adequacy Ratio (BCAR),
consistently positive net operating gains and its strategic initiatives
to grow ancillary lines of business to improve product and revenue
diversification outside its niche credit union marketplace.
Mitigating some of these trengths are CMFG Life's volatility in
statutory earnings performance in some of its business lines, its
declining premium revenue over the last few years, partly due to
strategically exiting non-core lines of business, and continued but
reduced, exposure to structured securities and realized losses from
The upgrading of MLIC's ratings acknowledges the new reinsurance
agreement between MLIC and CMFG Life. Under the coinsurance arrangement,
MLIC will cede 95% of its in-force and 100% of new product sales to CMFG
The ratings for CMFG Life are viewed as well positioned over the near to
medium term. Factors that could lead to negative rating actions include
deterioration in the company's balance sheet strength and financial
flexibility, widened realized and unrealized losses leading to a
substantial decrease in capital, measurable declines in premiums in core
lines of business without experiencing profitable growth in ancillary
lines or a weakened competitive market position in its niche credit
The ratings for CUMIS recognize its supportive level of risk-adjusted
capitalization, conservative balance sheet, overall operating
profitability and well-established niche position in the credit union
and multi-peril crop insurance segments.
Partially offsetting these positive rating factors for CUMIS are the
variability in its underwriting and investment results over the last
five years, which resulted in fluctuating operating returns as well as
pressure caused from general macroeconomic trends.
A.M. Best believes CUMIS is well positioned at its current rating level;
however, negative rating actions could occur if a supportive level of
risk-adjusted capitalization is not maintained or if results do not
continue to stabilize prospectively.
The methodology used in determining these ratings is Best's Credit
Rating Methodology, which provides a comprehensive explanation of A.M.
Best's rating process and contains the different rating criteria
employed in the rating process. Key criteria utilized include: "Rating
Members of Insurance Groups"; "Risk Management and the Rating Process
for Insurance Companies"; "Insurance Holding Company and Debt Ratings";
"Understanding BCAR for Property/Casualty Insurers"; "The Treatment of
Terrorism Risk in the Rating Evaluation"; and "Catastrophe Analysis in
A.M. Best Ratings." Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is the world's oldest and most
authoritative insurance rating and information source. For more
information, visit www.ambest.com.
Copyright © 2012 by A.M. Best Company, Inc. ALL RIGHTS
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