A.M. Best Affirms Ratings of Investors Heritage Life Insurance Company and Investors Heritage Capital Corporation

A.M. Best Co. has affirmed the financial strength rating of B+ (Good) and issuer credit rating (ICR) of "bbb-" of Investors Heritage Life Insurance Company (Investors Heritage Life). Concurrently, A.M. Best has affirmed the ICR of "bb-" of its holding company, Investors Heritage Capital Corporation [IHRC.OB]. Both companies are domiciled in Frankfort, KY. The outlook for all ratings is stable.

The ratings reflect Investors Heritage Life's stable operating performance (when excluding investment losses), its increased levels of net premiums written and niche position in the preneed marketplace. A combination of decreased statutory strain from new business production and prudent expense management has been the main drivers of consistent net operating earnings over the last five years. Net premiums written, which have been generally flat in prior years, reported increasing favorable trends over the last two years, mainly driven by acquired blocks of business.

Partially offsetting these positive rating factors are Investors Heritage Life's relatively modest capital position, high level of mortgage loans relative to capital and the unique challenges associated with the preneed marketplace. While this risk-adjusted capitalization is enhanced by the high credit quality of the company's fixed income portfolio, its risk-adjusted capital position, which is adequate as measured by Best's Capital Adequacy Ratio (BCAR), did decline in 2011 as a result of the recent acquisitions of certain blocks of business. While high credit quality bonds represent nearly 90% of invested assets, Investors Heritage Life retains a relatively high level of mortgage loan investments as a percentage of capital and surplus, which remains around 100%. The preneed industry remains competitive as the sustained low interest rate environment of recent years has contributed to a decline in policy growth rates for many companies.

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: "Insurance Holding Company and Debt Ratings." 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

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Contacts:

A.M. Best Co.
Jason Hopper
Financial Analyst
[phone], ext. 5016
[e-mail]
or
Richard McMillan
Assistant Vice President
[phone], ext. 5615
[e-mail]
or
Rachelle Morrow
Senior Manager, Public Relations
[phone], ext. 5378
[e-mail]
or
Jim Peavy
Assistant Vice President, Public Relations
[phone], ext. 5644
[e-mail]