AM Best

A.M. Best Revises Outlook to Stable for Lincoln Heritage Life Insurance Company


Joan Sullivan
Senior Financial Analyst
(908) 439-2200, ext. 5144

William Pargeans
Assistant Vice President
(908) 439-2200, ext. 5359
Christopher Sharkey
Manager, Public Relations
(908) 439-2200, ext. 5159

Jim Peavy
Assistant Vice President, Public Relations
(908) 439-2200, ext. 5644


OLDWICK - JUNE 11, 2015 04:48 PM (EDT)
A.M. Best has revised the outlook to stable from negative and affirmed the financial strength rating of A- (Excellent) and the issuer credit rating of "a-" of Lincoln Heritage Life Insurance Company (Lincoln Heritage) (Springfield, IL).

The outlook revision back to stable reflects the continued gradual decrease in financial leverage within the Lincoln Heritage enterprise, which includes the holding company, various trust and affiliated entities. This is expected to result in more stable and predictable dividend calls on the life insurance company.

The rating affirmations reflect Lincoln Heritage's prominent market position in the final expense market segment, consistent direct premium growth, profitable operations and a favorable risk-adjusted capitalization position. The company's effective lead generation program and affiliation with the Funeral Consumer Guardian Society has enabled Lincoln Heritage to be a prominent participant in the growing senior market place.

While dividend payouts have been reduced, the holding company's relatively high debt burden could result in higher future dividend requirements in a rising interest rate environment. Moreover, as a result of increased new business, Lincoln Heritage has increased its reliance on reinsurance, resulting in higher reinsurance leverage in recent years. Other negative rating factors include Lincoln Heritage's exposure to structured securities, which represents a substantial proportion of its statutory surplus, a concentrated business profile and modest return metrics. A.M. Best notes, however, there was a reduction to structured securities assets in 2014.

Positive rating action is unlikely for the near to medium term. Factors that may lead to a negative rating action include increasing financial leverage within the organization, deterioration in capital or earnings or significant further reliance on reinsurance.

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 .

Key insurance criteria reports utilized:

  • A.M. Best's Liquidity Model for U.S. Life Insurers

  • A.M. Best's Perspective on Operating Leverage

  • Risk Management and the Rating Process for Insurance Companies

  • Understanding BCAR for U.S. and Canadian Life/Health Insurers

This press release relates to rating(s) that have been published on A.M. Best's 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 visit A.M. Best's Ratings & Criteria Center.

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

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AMB# Company Name
006694 Lincoln Heritage Life Insurance Company