A.M. Best Co. has upgraded the financial strength rating to B-
(Fair) from C+ (Marginal) and issuer credit rating to "bb-" from "b-" of North
Coast Life Insurance Company (North Coast) (Spokane, WA). Both
ratings have been removed from under review with positive implications
and assigned a stable outlook. These rating actions follow the recent
acquisition of North Coast by Government Personnel Mutual Life
Insurance Company (GPM) effective December 31, 2012.
The rating upgrades reflect the improvement in North Coast's
capitalization, balance sheet quality and the potential benefits of the
acquisition by GPM. North Coast's surplus increased by $2 million
following the merger of a GPM subsidiary into North Coast. The balance
sheet quality has improved through the redemption of the North Coast
Life preferred stock, the aforementioned capital contribution and the
lower below investment grade bond exposure, which historically had been
elevated. A.M. Best notes that North Coast and GPM previously were
strategic partners, as they have had a reinsurance agreement in place
since 2008. NorthCoast policyholders should benefit from the
integration into a stronger organization, as well as expanded marketing
and distribution opportunities as part of GPM.
Offsetting rating factors include the still modest level of North
Coast's capital position, both from an absolute and risk-adjusted basis,
its susceptibility to spread compression in its interest sensitive
business segments as well as its limited business profile and scope of
Positive rating movement may occur if North Coast's risk-adjusted
capitalization levels continue to improve either through additional
capital contributions or organic earnings growth. Other factors that may
drive positive rating actions include further integration with North
Coast's new parent or expansion of its business profile. Negative rating
actions could result if risk-adjusted capitalization levels decline
materially or there is a significant deterioration in the company's
The methodology used in determining these ratings is Best's Credit
Rating Methodology, which provides a comprehensive explanation of A.M.
Best's rating process and contains the different rating criteria
employed in the rating process. Key criteria utilized include:
"Understanding BCAR for Life/Health Insurers" and "Rating Members of
Insurance Groups." Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is the world's oldest and most
authoritative insurance rating and information source. For more
information, visit www.ambest.com.
Copyright © 2013 by A.M. Best Company, Inc. ALL RIGHTS
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