Over the past few years, CUNA Mutual Group has focused on bolstering a number of areas to weather the most recent financial crisis.
Because of those efforts, the company reported May 24 that financial ratings agency A.M. Best affirmed the financial strength rating of CUMIS Insurance Society at “A” (excellent) and also upgraded the financial strength rating of Producers Agriculture Insurance Co. to “A” (excellent).
A.M. Best cited CUMIS’ conservative balance sheet, overall operating profitability and well-established niche position in the credit union marketplace, CUNA Mutual noted.
“The ratings further reflected the financial flexibility and diversified operations of CMFG,” the credit ratings agency reported, according to CUNA Mutual.
CUMIS and ProAg are subsidiaries of CMFG Life Insurance Co.
Maintaining a conservative balance sheet and profitable operations has been the focus for CUNA Mutual for several years, said Chris Copeland, corporate treasurer at the company.
“We want to make sure we’re a well-capitalized company. Establishing a niche position in the credit union marketplace–that’s been a key differentiator for us,” Copeland noted. “That is really the core of what we are.”
CUMIS has a very strong investment portfolio with 97% at bond investment grade or higher with an average rating of “A+”, Copeland said. The diversification strategy includes having a mix of risk through auto, home and fidelity bond coverage. That blend has helped navigate different types of exposure, which fortunately do not happen all at one time, he added.
CUNA Mutual President/CEO Jeff Post said he was especially pleased with A.M. Best’s take on the variety.
“We are pleased A.M. Best cited our diversification strategy in acknowledging our strong performance,” Post said in a statement. “CUNA Mutual Group has worked hard to bring greater value to credit unions and their members through our products and services, while keeping premiums down.”
Regarding operations profitability, Copeland said the company has experienced 12% in premium growth, while the expense ratio dropped by 7%. The ratio is obtained by taking the dollar expenses and dividing them by revenue or premium, he explained, adding CUNA Mutual ended 2011 with a 485% risk-based capital ratio. That ratio is typically calculated as statutory total adjusted capital divided by required or risk-based capital, according to the regulators, said Rick Uhlmann, CUNA Mutual senior manager of media relations. The required capital amount is determined through a detailed formula incorporating a company’s risks. An RBC of 485% would indicate that CUNA Mutual has 4.85 times the amount of capital required by regulators, Uhlmann pointed out.
In upgrading ProAg, A.M. Best recognized the support its reinsurance agreement with CUMIS provides, its business profile as one of the largest providers of crop insurance and its experienced management team, according to CUNA Mutual.
Meanwhile, A.M. Best’s latest ratings come on the heels of a new company model in place this year and several acquisitions and sales over the past nearly three years.
On Feb. 1, CUMIS officially reorganized to a mutual insurance holding company structure becoming CMFG Life Insurance Co. The company said it would continue to be mutually owned with the same policyholders having full ownership of the new parent mutual holding company entity. In addition, the new mutual holding company and its subsidiaries would continue to use the trade name CUNA Mutual Group.
In 2009, the company bought CPI Qualified Plan Consultants, a 401(k) provider, and ProAg, a crop insurer, which CUNA Mutual first partnered with in 2007.
In July 2010, CUNA Mutual said institutional investors bought $85 million in fixed-rate, 20- year surplus notes to support its credit union market and diversification strategies, including acquisitions and investment in business-to-consumer initiatives in the credit union marketplace.
CUNA Mutual has also sold off a few of its subsidiaries. After more than 40 years of service, it pulled its operations out of Australia selling the division to QBE Insurance Group. QBE Australia is a member of the QBE Insurance Group, Australia’s largest international insurance and reinsurance group.
As part of its strategic review process, CUNA Mutual said it concluded its Australian business would be better positioned to serve its customers and for future growth under a different ownership structure. The company has had business operations in Australia since 1969.