Best’s News & Research Service - June 02, 2016 11:49 AM (EDT)
A.M. Best Affirms Ratings of Investors Heritage Life Insurance Company and Investors Heritage Capital Corporation
- June 02, 2016 11:49 AM (EDT)
Oldwick //BestWire// - A.M. Best has affirmed the financial strength rating of B+ (Good) and issuer credit rating (ICR) of “bbb-” of Investors Heritage Life Insurance Company (Investors Heritage Life). Concurrently, A.M. Best has affirmed the ICR of “bb-” of the company’s ultimate parent, Investors Heritage Capital Corporation [OTC: IHRC]. Both companies are domiciled in Frankfort, KY. The outlook for each of these ratings is stable.
The rating affirmations reflect Investors Heritage Life’s consistent operating profitability and premiums in the company’s niche preneed segment, which A.M. Best views as a highly creditworthy product. The ratings also reflect the companies’ conservative asset management strategy that is concentrated in investment grade bonds, albeit the percentage of NAIC Class 2 bonds has increased. Financial leverage is modest with access to liquidity available through the Federal Home Loan Bank.
Offsetting rating factors include challenges in a key distribution relationship, modest risk-adjusted capitalization levels as measured by Best’s Capital Adequacy Ratio (BCAR) relative to peers and a limited business profile. Investors Heritage Life operates in the highly competitive niche of the preneed/final expense market in which its competitors have significant economies of scale. While overall investment risk is manageable, the company maintains large single investment exposure relative to capital, and interest coverage has declined in recent years.
Factors that could lead to a positive rating action include positively trending operating results on a sustained basis, along with an increase in sales from a strategic partner. A positive rating action could occur if risk-adjusted capitalization increases. A negative rating action could occur if the company’s operating profile trends negatively as measured by net premiums written or if there is a decline in operating income or risk-adjusted capitalization.
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 see A.M. Best’s Recent Rating Activity web page.
A.M. Best is the world’s oldest and most authoritative insurance rating and information source.