OREANDA-NEWS. Fitch Ratings is maintaining the ratings of CNO Financial Group Inc. (CNO) on Rating Watch Negative, following the company's announcement yesterday that it is recapturing its closed-block long-term care business that was reinsured by Beechwood Re Ltd. (Beechwood) since late 2013, and taking an associated charge estimated to be $55 million. A summary of all rating actions follows at the end of this release.

Fitch placed the ratings on Negative Watch on Aug. 3, 2016 following the reports of links between Beechwood and Platinum Partners, a hedge fund that is currently under investigation by federal authorities and is reportedly in the process of liquidating its funds.

KEY RATING DRIVERS

The Negative Watch reflects Fitch's view that, while CNO's announcement yesterday suggests strong progress in addressing the evolving risks associated with the Beechwood reinsurance agreement, sufficient uncertainty remains around the final outcome of an ongoing trust assets audit to maintain the Rating Watch. Should the final outcome result in no material variance from the company's estimates released yesterday, Fitch would expect to affirm CNO's ratings with a Stable Outlook.

As part of the recapture process, CNO is expected to contribute approximately $200 million of additional capital to Washington National Insurance Company (WNIC) to back the additional reserves that will return to the companies' balance sheet. Management has indicated that this will result in an estimated consolidated risk-based capital ratio of approximately 450% at Sept. 30, 2016, which is within Fitch's expectations for the company's current ratings.

Following the capital contribution to WNIC, CNO expects to have approximately $175 million of cash and investments at the holding company, which exceeds 24 months of interest and other holding company expenses. Fitch takes a favorable view of management's decision to suspend its share repurchase program for the remainder of 2016 to reinforce its holding company capital position.

Fitch will continue to monitor developments around this matter and will take rating action if warranted by emerging information.

RATING SENSITIVITIES

Key rating triggers that could lead to an affirmation of all ratings include:

--Completion of the audit of Level 3 assets associated with the Beechwood reinsurance agreement with no material additional writedowns;

--Successful completion of recapture of the closed-block long-term care business associated with the Beechwood reinsurance agreement;

--No material deterioration in other credit metrics.

Key rating triggers that could lead to a downgrade include:

--A significantly adverse resolution to the reinsurance matter discussed above;

--Combined NAIC RBC ratio less than 325% and operating leverage above 20x;

--Deterioration in operating results;

--Decline in fixed charge coverage to below 5x;

--Significant increase in credit-related impairments;

--Financial leverage above 30%.

FULL LIST OF RATING ACTIONS

Fitch has maintained the following ratings on Rating Watch Negative:

CNO Financial Group, Inc.

--IDR 'BBB-';

--4.50% senior unsecured notes due May 30, 2020 'BB+';

--5.25% senior unsecured notes due May 30, 2025 'BB+'.

Bankers Life and Casualty Company

Bankers Conseco Life Insurance Company

Colonial Penn Life Insurance Company

Washington National Insurance Company

--IFS 'BBB+'.