DUFF & PHELPS: KENTUCKY HOME MUTUAL LIFE INSURANCE COMPANY CLAIMS PAYING ABILITY RATING REAFFIRMED AT 'A+'
CHICAGO, July 9, /PRNewswire/ -- Duff & Phelps Credit Rating Co. has reaffirmed the "A+" (Single-A-Plus) claims paying ability rating of Kentucky Home Mutual Life Insurance Company. The rating balances the company's very strong surplus position against the risks associated with the development of future growth strategies for its insurance operations. Kentucky Home Mutual Life Insurance Company is a modest-sized mutual life insurance organization, with admitted assets totaling $42 million and adjusted surplus of $18 million. At year end 1992, operating leverage (adjusted liabilities to adjusted surplus) was an extremely conservative 1.2 times. In recent years the company assembled a team of experienced insurance executives with the objective of returning the company's focus away from investment management and toward insurance related operations following a number of years during which premium volume was intentionally allowed to decline. In recent years the company had been involved in selling individual life insurance through the payroll deduction market and very recently expanded its products to include group life products offered through Blue Cross and Blue Shield of Kentucky. During 1992 the company conducted an analysis of the group life business and determined this business to be unprofitable with minimal opportunity to reach critical mass. During 1992 the company incurred unanticipated losses from expense overruns due to BC/BS of Kentucky's inability to generate sufficient premium volume under its marketing agreement with Kentucky Home Mutual. Primarily because of these cost overruns, Kentucky Home Mutual and its insurance subsidiary, Kentucky Home Life Insurance Company, produced a combined net operating loss of $2.1 million in 1992. The marketing agreement with BC/BS of Kentucky was cancelled as of March 31, 1993, and the group life business and its risks have been assumed by the Anthem Life Insurance Company of Indiana. In association with its discontinuance of its group life business, the company has reduced staff and operating costs. Because of these actions, we expect the company to generate a modest net gain from operations in 1993. The company has developed a "seniors" (ages 40-80) life insurance product and is in the process of recruiting agents who specialize in this product. The company is also expected to enter the annuity market through several marketing channels. Kentucky Home Mutual has been selected as a provider of choice for life and annuity products by the Community Bankers Association of Kentucky. The Community Bankers Association of Indiana has also selected Kentucky Home Mutual as a provider of choice for life and annuity products, but the company expects to supply products through this channel at a later date. About 53 percent of invested assets are in bonds. None were below investment grade and most were government backed. There were no mortgage investments at year end 1992. Equity investment positions have been reduced significantly in recent years. At the end of 1992, equity investments (excluding subsidiary investments) represented about 10 percent of invested assets, the majority of which was represented by its investment in Liberty National Bankcorp stock. Subsidiary investments represented 11 percent of total invested assets. -0- 7/9/93 /CONTACT: Kevin A. Ceurvorst, CFA, Duff & Phelps Credit Rating Co., 312-368-3144/
CO: Kentucky Home Mutual Life Insurance Company ST: Kentucky IN: INS SU: RTG
LG -- NY057 -- 9973 07/09/93 14:13 EDT
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|Date:||Jul 9, 1993|
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