AM Best Revises Issuer Credit Rating Outlook to Stable for Life Insurance Company of Alabama

OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has revised the outlook to stable from positive for the Long-Term Issuer Credit Rating (Long-Term ICR) and affirmed the Financial Strength Rating (FSR) of B++ (Good) and the Long-Term ICR of “bbb” (Good) of Life Insurance Company of Alabama (LICOA) (Gadsden, AL). The outlook of the FSR is stable.

The Credit Ratings (ratings) reflect LICOA’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and marginal enterprise risk management (ERM).

The revision of the Long-Term ICR outlook to stable from positive reflects the material pressure on the company’s operating performance and balance sheet strength metrics. While LICOA’s overall balance sheet strength is assessed as very strong, its absolute capital and surplus has declined at a 6.6% compound annual growth rate over the past five years. In 2024, capital and surplus experienced a decline largely driven by a net loss from an increase in death benefits on its life business, as well as an increase in unlimited cancer claims. Capital was also affected by an increase in non-admitted assets and an increase in asset valuation reserves.

On an operating performance basis, LICOA reported a significant loss in underwriting results through year-end 2024, following a historical trend of underwriting losses over the past five years. These underwriting losses were also driven by the spike in LICOA’s life and cancer claims, as well as a decrease in overall accident & health lines of business after experiencing favorable gains in each of the prior two years. Increases in general expenses and commissions also contributed to the underwriting loss. Despite the underwriting losses, the company had been able to generate consistent profitability in prior years as a result of favorable investment income; however, it experienced a net loss for 2024. Additionally, LICOA’s profitability ratios are lower than peers through year-end 2024; however, earnings are projected to improve in 2025 and beyond, although not to prior levels. Net premiums written have also trended unfavorably over the past five years and remained relatively flat through year-end through 2024, despite an increase in life insurance product sales.

LICOA’s business profile is assessed as limited due to its nominal share of the supplemental accident and health and life worksite market. The company specializes in serving small- to medium-size employer groups in rural areas of the Southeastern United States, with a focus on cancer and life products. This exposes the company to concentration risk as approximately 80% of net premiums are derived from four Southeastern states. LICOA has expanded into Texas, and while it is anticipated that this will bolster growth, product sales have been slow to start in the region.

Finally, AM Best notes that LICOA has made improvements to its ERM program in recent years. The organization engaged with an external consultant to help form a framework for its ERM program in 2019 and has since made additional enhancements to it. LICOA maintains a detailed risk register, which identifies and ranks the organization’s risks based on severity. The company’s ERM program includes well-defined controls and mitigation strategies for its top risks and the chief risk officer holds quarterly risk management meetings to discuss identified risks and mitigation strategies. Furthermore, LICOA has made strong enhancements to its cyber security in recent years. Due to the company’s relatively small size, management has sufficient visibility into the daily operations and inherent risks of LICOA. AM Best believes the ERM program itself is satisfactory for the organization’s operations, however; AM Best will continue to monitor the company’s ability to display its risk management program in practice, especially as the organization expands in Texas and potentially other states, and looks to return to profitability.

This press release relates to Credit Ratings that have been published on AM 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 AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2025 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.