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AM Best Revises Outlooks to Positive for ELCO Mutual Life and Annuity


AM Best has revised the outlooks to positive from stable and affirmed the Financial Strength Rating of B (Fair) and the Long-Term Issuer Credit Rating (Long-Term ICR) of bb+ of ELCO Mutual Life and Annuity (ELCO) (Lake Bluff, IL).

The ratings reflect ELCOs balance sheet strength, which AM Best categorizes as weak, as well as its strong operating performance, neutral business profile and marginal enterprise risk management. The revised outlooks to positive reflect a continued strengthening in ELCOs balance sheet, including improving risk-adjusted capitalization, as measured by Bests Capital Adequacy Ratio (BCAR), from profit-based growth in absolute capital, improvements in the risk profile of its investment portfolio and reduced reinsurance leverage. ELCOs balance sheet had been impacted by unfavorable balance sheet factors, including the asset portfolio composition, which historically has had a higher risk profile, and previously, a very high dependence on reinsurance for ELCOs deferred annuity business. Continued improvement of balance sheet strength could result in positive rating action.

ELCOs balance sheet strength assessment mainly reflects the companys weak level of risk-adjusted capitalization, together with significant reinsurance leverage and limited financial flexibility, partly offset by the absence of financial leverage and a mostly investment grade fixed income portfolio. Furthermore, AM Best notes that ELCOs financial flexibility is somewhat limited as a small mutual company. The company has a long history of producing operating profits that support capital growth. Returns on equity are strong and driven by the profitability of its core Medicaid-compliant annuity products, which are expected to see continued growth. AM Best expects the companys operating profitability to remain favorable over the near term.

ELCOs business is concentrated in annuity offerings, although the company sells pre-need life insurance products, which add diversity. Annuity production is centered on the senior market. Elder care attorneys provide deposit-type single premium annuity sales. This is ELCOs core business, and the company has been a major participant in these markets for over two decades. Independent general agents distribute most deferred annuities. The groups enterprise risk management assessment is reflective of a governance structure, culture and risk management controls commensurate with a small mutual insurer.

This press release relates to Credit Ratings that have been published on AM Bests 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 Bests Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Bests Credit Ratings. For information on the proper media use of Bests Credit Ratings and AM Best press releases, please view Guide for Media – Proper Use of Bests Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global rating agency and information provider with a unique focus on the insurance industry. Visit for more information.

Copyright 2019 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

Richard Francis
Senior Financial Analyst
908 439 2200, ext. 5152


Associate Director
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Manager, Public Relations
+1 908 439
2200, ext. 5159


Director, Public Relations
+1 908 439
2200, ext. 5644

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