AM Best Downgrades Credit Ratings of Members of Columbian Financial Group; Revises Under Review Status to Negative

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

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

The rating downgrades reflect a decline in CFG’s overall balance sheet strength to an assessed level of weak from an adequate assessment, relating to a significant decline in the company’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), in the fourth quarter of 2022 well below targeted levels, driven by reserve increases from an unclaimed property review. The company also incurred operating losses primarily related to continued adverse mortality experience from the effects of the COVID-19 pandemic on the senior market, and declining net premium written.

The ratings were put under review shortly after CFG’s announcement on June 29, 2021, that its board of directors had approved a strategic transaction with Constellation Insurance Holdings, Inc. (Constellation) that includes the sponsored demutualization of Columbian to a stock company with the issuance of all newly issued stock to Constellation. Constellation is an insurance holding company backed by two large Canadian institutional investors primarily engaged in the management of pension plans, Caisse de Dépôt et Placement du Québec and Ontario Teachers’ Pension Plan Board. The transaction would provide for Constellation to invest up to $100 million to fund cash payments to eligible policyholders and significantly strengthen Columbian’s capitalization. The acquisition of Columbian by Constellation would provide Columbian needed capital support from a substantially larger organization while maintaining its brand, management team and headquarters. Despite an expected positive impact on capital from the planned transaction with Constellation, the anticipated closing date has been pushed back several times due to delays in obtaining regulatory approvals. The negative implications reflect AM Best’s concerns around the potential for continued losses and the level of capital going forward, especially should the transaction not occur. The ratings will remain under review with negative implications until the transaction approvals are finalized, the transaction closes, and AM Best evaluates the overall impact.

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.

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