A.M. Best lowers Mid-Continent Life to "B" (Fair), puts rating under review with negative implications.

OLDWICK, N.J.--(BUSINESS WIRE)-- April 16, 1997--Effective immediately, A.M. Best Co. has lowered the "A" (Excellent) rating on Mid-Continent Life Insurance Co., Oklahoma City, to "B" (Fair) and placed it under review with negative implications.

This downgrade into the Vulnerable range was taken after the Oklahoma Insurance Department assumed temporary control of the company on April 14, 1997. The insurance commissioner's petition stated that a significant number of policyholders had complained about the prospect of Mid-Continent raising premiums on its level-premium product. The petition also alleged that Mid-Continent's policy reserves are understated.

As a result of the uncertainty related to the adequacy of product pricing and reserving and the total restructuring of its distribution force, A.M. Best on April 8, 1997, told management that the company's rating would be lowered from "A" to "B++", effective April 21, 1997. However, because of the actions taken by the insurance department and the uncertainty surrounding the outlook for the company, the rating was instead lowered to "B".

The department's action is known as judicial rehabilitation. Judicial rehabilitation is similar to Chapter 11 bankruptcy, which is designed to rehabilitate a company and then return it to normal operations. A hearing has been scheduled for May 14, 1997. Representatives of Mid-Continent and its parent, Florida Progress Corp., are scheduled to meet with the Insurance Department on April 18, 1997.

Although the company has reported profitable earnings performance and favorable risk-adjusted capitalization, it recently revealed that it discovered pricing issues related to the sale of its primary life insurance product, which had been sold since 1987. The company had begun addressing these pricing issues this year, which included informing policyholders of possible premium increases to its level premium life insurance product.

Management has consistently provided internal actuarial opinions attesting to the adequacy of its reserves, including the most recent opinion as of year-end 1996. The company had added $10.0 million in additional reserves since 1995 as a result of its cash- flow testing. In September 1996, A.M. Best requested an independent third-party actuarial appraisal of reserve adequacy. As recently as March 1997, the company had advised A.M. Best that a third-party audit that would detail the adequacy of reserves was under way.

Mid-Continent Life's rating will remain under review pending further discussions with representatives of the company, its parent and the Oklahoma Insurance Department. A.M. Best Co., established in 1899, is America's oldest and most widely recognized insurance rating and information source.

CONTACT: Jeffrey Dunsavage

[phone], ext. 5618

http://www.ambest.com