Fitch ups CNO outlook over reinsurance purchase
Fitch Ratings has revised the outlook for CNO Financial Group to positive from stable following the company’s recent reinsurance transaction.
CNO Financial Group’s wholly-owned subsidiary, Bankers Life and Casualty Company has entered into an agreement with Wilton Reassurance Company (Wilton Re) to cede all of its legacy (prior to 2003) comprehensive and nursing home long-term care policies (with statutory reserves of approximately $2.7 billion) through 100 percent indemnity coinsurance.
Bankers Life will pay a ceding commission of $825 million to reinsure the block, funded through excess capital in the insurance subsidiaries and at the holding company.
The outlook revision reflects Fitch’s view that CNO's ratings could be upgraded over the next 12 to 18 months based on the company's recently announced long-term care (LTC) reinsurance agreement with Wilton Re. Fitch anticipates that through the significant de-risking of CNO's legacy LTC exposure that the company's business profile, earnings profile and balance sheet fundamentals will improve. However, the degree of improvement will remain somewhat muted by headwinds associated with the low-interest rate environment and the company's retained exposure to LTC liabilities, Fitch noted.
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