A.M. Best Downgrades Rating of AF&L Insurance and Its Subsidiary.

OLDWICK, N.J. -- A.M. Best Co. has downgraded the financial strength rating to D (Poor) from B (Fair) of AF&L Insurance Company (AF&L Insurance) and its subsidiary, Senior American Life Insurance Company (Senior American) (both of Warrington, PA). The rating outlook is negative.

The rating reflects AF&L Insurance's capital position and substantial fourth quarter 2004 net loss as a result of reserve increases, losses from its long-term care business and one-time expenses associated with management's restructuring. The increased losses have caused substantial deterioration to the organization's capital and surplus position. At year-end 2004, AF&L Insurance reported negative capital and surplus on its annual statement. Consequently, AF&L Insurance and Senior American have ceased writing any new business.

AF&L Insurance is currently working with regulatory authorities to attempt to rectify its current financial position. While its subsidiary Senior American's year-end financials are not as troubled, it is still adversely impacted by AF&L Insurance's financial condition.

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