KBRA Upgrades Rating for Catholic Financial Life
1 Dec 2023 | New York
KBRA upgrades the insurance financial strength rating (IFSR) to A from A- for Catholic Financial Life. The Outlook has been revised from Positive to Stable.
The rating upgrade reflects Catholic Financial Life’s (CFL or the Society) continued execution of its business strategy focused on relatively lower risk life products and the company’s consistent track record in risk-based capital and surplus growth underpinned by sustained, consistent trends of profitability and balanced earnings. CFL remains fully committed to fraternalism and the support of its members. Overall balance sheet growth, as well as margins and capital trends have generally been favorable relative to fraternal and non-fraternal peer averages. Further, reserves remain generally balanced across life and annuity products and are complemented by an investment portfolio comprised of low-risk, high-quality fixed income securities. Across the past year, the impact of heightened disintermediation risk has been relatively muted and largely mitigated by the implementation of various risk management strategies, such as the adjustment of crediting rates, the introduction of new products and successful internal exchanges.
The Society remains one of the largest Catholic fraternal membership societies in the United States. CFL continues to focus on writing life products and growing membership within its current product offerings supported by ongoing technological enhancements. Demonstrated success in acquiring and/or merging with other fraternals, successfully integrating the in-force blocks of business, and recognizing efficiencies from the added economies of scale remain favorable credit considerations. CFL’s corporate governance is strong and enterprise risk management practices are progressive and continue to evolve. Lastly, in KBRA’s opinion, CFL’s management team remains a strength as it executes its forward-looking growth and technological strategy.
Balancing these credit strengths is an annuity block with a significant but declining portion of contracts subject to withdrawal with minimal or no surrender charges, although this exposure remains mitigated to an extent by generally higher historical persistency. In addition, execution risk persists for planned near-term technology enhancements, specifically with respect to its policy administration system, though current completion timeframes appear to be on track.
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