FEBRUARY 26, 2014 04:08 PM (EST)

A.M. Best Upgrades Ratings of Life Insurance Company of Alabama


CONTACTS:
 Brian Virostek
Financial Analyst
(908) 439-2200, ext. 5531
brian.virostek@ambest.com

Joseph Zazzera, MBA
Assistant Vice President
(908) 439-2200, ext. 5797
joseph.zazzera@ambest.com

Rachelle Morrow
Senior Manager, Public Relations
(908) 439-2200, ext. 5378
rachelle.morrow@ambest.com

Jim Peavy
Assistant Vice President, Public Relations
(908) 439-2200, ext. 5644
james.peavy@ambest.com

FOR IMMEDIATE RELEASE

OLDWICK - FEBRUARY 26, 2014 04:08 PM (EST)
A.M. Best has upgraded the financial strength rating to B++ (Good) from B+ (Good) and the issuer credit rating to "bbb" from "bbb-" of Life Insurance Company of Alabama (LICOA) (Gadsden, AL) [OTCBB: LINSA]. The outlook for both ratings has been revised to stable from positive.

The rating upgrades reflect LICOA's established niche market in its supplemental accident and health/life insurance segment, consistent earnings trends, robust risk-adjusted capitalization and improvement in its historically elevated risk profile.

LICOA is a small, closely held public company that offers supplemental insurance products to employer groups and individuals. In recent years, the company has reported consistently favorable operating results, despite some one-time items and unfavorable results in its unlimited cancer block of business.

The earnings have continued to bolster the company's risk-adjusted capitalization, which remains strong as measured by Best's Capital Adequacy Ratio (BCAR).

A.M. Best believes that LICOA has materially reduced its exposure in its unlimited cancer block. This is the result of the settlement of two class action lawsuits in late 2011--much of which had been previously reserved while in dispute--combined with the conversion of the majority of its unlimited cancer policies to limited benefit policies. A.M. Best will continue to monitor the impact that this block of business has on the company going forward, as well as the success of its premium rate increase strategy.

Offsetting rating factors include LICOA's flat premium revenue in recent years due to policyholder conversions from higher premium unlimited cancer policies to lower premium limited cancer policies, lower sales driven by local economic conditions and a mandatory one-year premium rate freeze in 2012 on parts of its cancer block. In addition, the company has business concentrations in the cancer insurance market and in four southeastern states.

A.M. Best notes the unlikelihood of upward rating movement in the near-to-medium term given LICOA's rating upgrades. Conversely, negative rating actions could occur if the company is unable to meet its modest growth projections, cannot achieve greater diversification of its revenue and earnings and/or material litigation/excessive claims arise in its remaining unlimited cancer business.

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. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.


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AMB# Company Name
006637 Life Insurance Company of Alabama