KBRA Affirms Rating for Catholic Order of Foresters
1 Nov 2024 | New York
KBRA affirms the A- insurance financial strength rating for Catholic Order of Foresters (COF or "the Order"). The Outlook is Stable.
The rating reflects COF’s balanced business and reserve mix, sound financial flexibility and liquidity, along with a historically solid balance sheet with minimal use of reinsurance and a long-term strategic focus. COF is committed to writing continuous pay life insurance while growing membership within its current product offerings. The organization maintains a relatively high-quality bond portfolio, with approximately 72% rated in the single A category or above as of Q2 2024, and its investment team has a proven track record of performance. COF’s reserve mix is well-balanced between life and annuities, supported by a general agency distribution model that incentivizes traditional life products. Average premiums per policy and average face values of new business for life products have trended up, contributing to growth in the core product portfolio despite overall membership declines. Near-term operating results have improved, reversing a multi-year trend of sustained operating losses.
Balancing these strengths are COF’s prior trend of operating losses which have negatively impacted its capital base. Although COF’s risk-based capital (RBC) ratio is adequate at 267% company action level (CAL) and within its targeted range, it has trended unfavorably over the last few years and remains significantly below benchmarks. Volatility in risk-adjusted capital is primarily driven by elevated asset risk charges and unfavorable operating results. While the majority of invested assets consists of high-quality bonds, COF has notable exposure to higher-risk assets relative to total adjusted capital, including below investment grade bonds and other invested assets. Additionally, COF faces profitability headwinds due to somewhat elevated annuity outflows, which increases reinvestment risk.
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