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Fitch adjusts rating for CUNA Mutual
MADISON, Wis. (3/16/09)--Fitch Ratings lowered the insurer financial strength rating for CUNA Mutual Group. The rating was adjusted from ‘AA-’ (Very strong) to ‘A’ (Strong) with a Negative Outlook in its annual ratings review, citing current and future economic turmoil as the primary drivers for the ratings change. The change reflects CUNA Mutual’s above-average exposure to residential mortgage-backed securities and asset-backed securities, Fitch said. Fitch had previously put the life insurance sector on an industry-wide negative outlook. “CUNA Mutual is not immune to market events, but even in the current economic environment we remain financially strong,” said Jeff Holley, CUNA Mutual’s chief financial officer. “Our ability to pay claims has not been impeded and we remain well capitalized--even in these difficult economic times.” Fitch said the ratings "reflect the expectation that operating performance will be hindered by a further decline in assets under management.” Fitch wrote in its release, "Favorably, CUNA Mutual’s ratings consider its strong market position in the credit union marketplace, conservative reserving practices, and solid liquidity.” CUNA Mutual’s financial strength and capital position remain strong and the company’s business operations produced solid revenue growth and operating results in 2008. The company’s revenues grew by nearly 7% and operating gain exceeded $150 million last year, the company said. Fitch noted that CUNA Mutual reported a $148.9 million net loss in 2008, compared with $183.6 million of net income in 2007--which it said reflected deterioration in its investment portfolio along with lower earnings in its asset accumulation and commercial products. Many financial experts predict the economic recession will continue throughout 2009-- and Fitch has built this expectation into its ‘A’ rating of CUNA Mutual. The ‘A’ rating applies to the principal companies of CUNA Mutual Insurance Society and CUMIS Insurance Society Inc., a property and casualty subsidiary. The ‘A’ rating is the sixth highest rating of 19 categories of ratings Fitch issues. Fitch also placed CMG Mortgage Insurance Co., which is 50% owned by CUNA Mutual and 50% owned by PMI Mortgage Insurance Company, on Rating Watch Negative.
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