AM Best Downgrades Credit Ratings of Members of Columbian Financial Group; Maintains Under Review With Negative Implications Status

AM Best has downgraded the Financial Strength Rating to C+ (Marginal) from C++ (Marginal) and the Long-Term Issuer Credit Ratings to “b-” (Marginal) from “b” (Marginal) of Columbian Mutual Life Insurance Company (Columbian) (Binghamton, NY) and Columbian Life Insurance Company (CLIC) (Chicago, IL), collectively referred to as Columbian Financial Group (CFG). Concurrently, AM Best has maintained the under review with negative implications status for these Credit Ratings (ratings).

The ratings reflect CFG’s balance sheet strength, which AM Best continues to assess as very weak, as well as its marginal operating performance, neutral business profile and appropriate enterprise risk management.

While operating losses narrowed slightly in 2023 compared with 2022, partly due to lower mortality claims experience, the losses continued to pressure CFG’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). A narrower net loss was largely driven by a permitted practice by New York State Department of Financial Services (NYS DFS) that allowed the mutual parent company, Columbian, to accelerate interest maintenance reserve amortization of $6 million. This helped offset a $3 million impairment of an investment in a fixed income security issued by a regional bank in the first quarter of 2023.

The ratings were put under review shortly after the CFG announcement on June 29, 2021, that its board of directors had approved a strategic transaction with Constellation Insurance Holdings, Inc. (Constellation), which included the sponsored demutualization of Columbian to a stock company. It is expected that Constellation would provide CFG needed capital support from its substantially larger organization while CFG maintains its brand and focus on the senior life insurance market and the associated consumer needs for preneed and final expense life insurance products. Despite an expected positive impact on capital from the planned transaction with Constellation, the anticipated closing date has been pushed back several times.

Since the NYS DFS initiated an unclaimed property review in December 2021, CFG management has indicated that the group has booked incremental reserves for anticipated payouts to beneficiaries of insured lives who are deceased, according to the Social Security Death Master File; however, the final outcome remains uncertain. The CFG Board remains focused on completing this review and also approved extending the merger agreement with Constellation, this time through June 30, 2024; which would imply the transaction could close by the end of the second or third quarters of 2024.

The under review status reflects AM Best’s expectation that the company’s BCAR assessment and hence the security of the policyowners’ existing coverages should improve upon the closing of the transaction. The negative implications status captures AM Best’s concerns around the potential for continued losses and the level of capital going forward, especially if the unclaimed property review and transaction do not reach a conclusion. AM Best will continue to monitor the transaction and financial strength of the company.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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