OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb+” (Good) of CICA Life Insurance Company of America (CICA). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect CICA’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).
The strong balance sheet strength assessment reflects the company’s very strong level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), on a pro forma basis with parental backing from the publicly traded parent, Citizens, Inc. [NYSE: CIA]. AM Best expects CICA’s risk-adjusted capitalization to decline primarily due to statutory expense strain from increasing new business sales and infrastructure investments to support future growth plans. The company is expected to be operating close to its parental support mandated capitalization floor over the next few years.
Factors mitigating the company’s capital decline include a low dependence on reinsurance as it retains most new business. The company also has access to capital via Federal Home Loan Bank lending, various lines of credit, as well as parental liquidity and capital market channels.
Partially offsetting these factors is CICA’s limited business profile, which reflects execution risk pertaining to the business growth plan being pursued. The company has expanded nationally yet premium concentration exists among the top five states where it writes business. While AM Best expects significant premium growth in the coming years, CICA’s bottom-line performance on a statutory basis is projected to be negative until it can achieve scale and earnings generated from in-force business can offset new business strain.
The stable outlooks reflect AM Best’s expectation that over the intermediate term, the company will maintain a strong balance sheet strength assessment, supported by additional initiatives that will further leverage the parent company’s ERM framework. AM Best will continue to monitor CICA’s progress in executing its business plan and its impact on operating performance and surplus.
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