|[May 08, 2012]
A.M. Best Revises Outlook to Negative for Lincoln Heritage Life Insurance Company
OLDWICK, N.J. --(Business Wire)--
A.M. Best Co. has revised the outlook to negative from stable and
affirmed the financial strength rating of A- (Excellent) and issuer
credit rating of "a-" of Lincoln Heritage Life Insurance Company
(Lincoln Heritage) (Springfield, IL).
The negative outlook reflects an increased level of financial leverage
within Lincoln Heritage, which is anticipated to result in dividend
calls on the company. Future dividend requirements may be exacerbated 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 over the last two
years. Other negative rating factors include Lincoln Heritage's exposure
to structured securities, which represents a substantial proportion of
its statutory surplus, a limited business profile and dividend payments
that have constrained surplus growth.
The rating affirmations reflect Lincoln Heritage's prominent market
position in the final expense lifeinsurance segment, consistent direct
premium growth, a return to positive net overall results and a more than
adequate 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 marketplace.
Factors that may lead to negative rating actions include deterioration
in Lincoln Heritage's balance sheet quality, limited surplus growth,
increasing financial leverage within the company and any further
reliance on reinsurance. Factors that may lead to revising the outlook
to stable include reduced leverage at Lincoln Heritage and an
improvement in the quality of its capital through the retention of
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. Key criteria utilized include:
"Understanding BCAR for Life/Health Insurers" and "Evaluating
Non-Insurance Ultimate Parents." Best's Credit Rating Methodology can be
found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is the world's oldest and most
authoritative insurance rating and information source. For more
information, visit www.ambest.com.
Copyright © 2012 by A.M. Best Company, Inc. ALL RIGHTS
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