AM Best Assigns Credit Ratings to Continental General Insurance Company

AM Best has assigned a Financial Strength Rating of B+ (Good) and a Long-Term Issuer Credit Rating of “bbb-” (Good) to Continental General Insurance Company (CGIC) (Austin, TX). The outlook assigned to these Credit Ratings (ratings) is stable.

The ratings reflect CGIC’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, very limited business profile and appropriate enterprise risk management (ERM).

CGIC has grown its level of available capital and invested assets, most recently through a series of assumed reinsurance treaties and acquisitions of primarily closed blocks of long-term care (LTC) insurance business, which included the statutory merger of the ex-Humana Kanawha block in 2018. Other notable transactions include the reinsurance of incremental LTC business from Elevance Health, Inc. (formerly Anthem) in 2023, highlighting CGIC's continued implementation of its LTC acquisition strategy.

The company reported approximately $4.6 billion of invested assets at the end of the second quarter of 2024, and roughly $573 million of statutory capital and surplus. The company’s balance sheet strength assessment of strong reflects its very strong level of risk-adjusted capitalization, as measured by Best's Capital Adequacy Ratio (BCAR). CGIC was acquired by new ownership on July 1, 2021, which has provided operational and strategic direction, in addition to leading the company’s value-oriented equity investment allocation that has contributed to favorable overall investment performance. The principal owner can also infuse capital contributions to support business growth if needed.

The group’s operating performance will primarily depend on the adequacy of ceding commissions and the market value of assets transferred on LTC block reinsurance deals, in comparison with the insurance and business risks assumed, and the lift in net yield from rotating assets to CGIC’s target portfolio. The company's net premium levels have remained robust partly due to favorable policy persistency despite some premium rate increases, which can be further enhanced through the company’s pre- and post-claim wellness program initiatives. CGIC’s claims management process and controls also include technologies such as GPS monitoring of caregivers through a vendor to help mitigate fraudulent claims, and thereby in the long run keep insurance premiums accessible for more lives to help close morbidity and mortality protection gaps for valid claims that have been sustainably priced for.

Partially offsetting the positive factors is CGIC’s concentration in LTC products that constitute over 90% of retained reserves and net written premium, which places pressure on the company’s business profile assessment. CGIC has not written direct business since August 2014, but the company is expected to grow and diversify profitable revenue streams over time, most notably through the launch in the retail market of new final expense, hybrid long-term care, and indexed universal life products that also focus on addressing the needs of the senior market. CGIC’s strategic use of life reinsurance from well-rated counterparties is expected to reduce the impact of upfront commissions and acquisition cost strain on available capital. CGIC’s affiliated third-party administrator, Continental General Services LLC, currently delivers administrative solutions to a number of Life and LTC (re)insurance providers. This further supports the group’s strategy to diversify earnings through capital-light fee-based revenue and leverages the firm’s successful track record in acquiring and managing such blocks.

The company has an elevated allocation to public equity securities compared with the industry average; however, real returns could match its longer-duration inflation-linked liabilities. In addition, there is some geographic concentration as approximately 77% of net written premium is derived from five states. CGIC’s experienced and long-standing management have an intimate understanding of each state regulator’s limitations on approving actuarially justified premium rate increases for in-force LTC business. CGIC has limited competition in its core market of acquiring closed LTC blocks that are non-core or underperforming for its partners, but the company will likely face substantial competition and execution risk as it continues to scale and diversify operations over time. Given the range of legacy blocks onboarded by CGIC from various carriers, the group will need to continue monitoring its relationships with third-party partners and service providers to minimize operational risk under its ERM program; although CGIC recently invested in its administrative platform to support accelerated growth and for continued efficiency gains.

The stable outlooks reflect AM Best’s expectation that over the intermediate term CGIC will maintain a strong overall balance sheet strength assessment and adequate operating performance. AM Best will monitor the company’s future capitalization against planned growth initiatives.

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.

Copyright © 2024 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

View source version on businesswire.com: https://www.businesswire.com/news/home/20241121411017/en/