OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has affirmed the financial strength rating of B++ (Good) and the issuer credit rating of “bbb” of Life Insurance Company of Alabama (LICOA) (Gadsden, AL) [OTCBB: LINSA]. The outlook for both ratings is stable.
The rating affirmations reflect LICOA’s established regional niche market in its supplemental accident and health/life segments as the company markets accident, health and life insurance products primarily to rural areas in the southeastern United States. LICOA has reported relatively stable profitability over the past several years, excluding 2014 when earnings were boosted by one time realized gains. Consistent favorable net investment income has also supplemented modest underwriting results over the period. LICOA is considered well-capitalized for its business risks. Capital levels have been able to improve in the past few years primarily due to consistent net income, partially offset by stockholders dividends.
Offsetting factors include LICOA’s flat trend of net premium revenue over the past few years; however, net premium revenue in 2015 declined due to a lower level of new sales, driven by the highly competitive supplemental accident and health and life benefits market. Furthermore, the company has above average investment risk compared to peers. While approximately 90% of LICOA’s bond portfolio is investment grade, the company has been increasing its exposure to class 2 bonds, which represented more than 75 percent of the bond portfolio at year-end 2015. Furthermore, the company’s exposure to below investment grade bonds has increased, largely due to downgrades of existing holdings.
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