KBRA Releases Surveillance Report for ELCO Mutual Life and Annuity

On August 7, 2024, KBRA affirmed the BBB Insurance Financial Strength Rating (IFSR) for ELCO Mutual Life and Annuity ("ELCO" or "the company"). The Outlook is Stable.

The IFSR reflects the company’s demonstrated track record of organic growth of its surplus and capital bases underpinned by consistent trends of profitability and earnings, its low-risk flagship product of Medicaid-compliant annuities ("MCA") with high earned margins, conservative investment portfolio with an improving overall asset/liability management profile, and the demonstrated formalization, continuous refinement, and maturation of its corporate governance, enterprise risk management, and strategic and financial planning processes . ELCO continues to employ a niche strategy within the senior market and benefits from a growing portfolio of annuity and life insurance products, which, along with modest geographic expansion, should help to diversify its premium and reserve mix over the longer term.

Balancing these credit strengths is significant concentration risk with a leading distribution partner, a business mix which lacks diversification though continues to modestly improve, and exposure to regulatory shifts within the MCA space, though no regulatory changes are currently under consideration. In KBRA’s view, while earnings have been consistently favorable, continued, sustained growth in surplus and risk adjusted capital would mitigate concentration risk to an extent, all else equal. Though declining significantly across the last several years, reinsurance leverage remains significantly elevated.

To access rating and relevant documents, click here.

Click here to view the report.