A.M. Best Affirms Lincoln General Insurance Financial Strength Rating

Officials for Kingsway Financial Services Inc. recently announced the A.M. Best Co. has affirmed the financial strength rating of its largest insurance subsidiary, Lincoln General Insurance Co., of A- Excellent. The rating was removed from under review and assigned a negative outlook.

The excellent financial strength rating largely is due to the recent actions of parent company Kingsway Financial, but A.M. Best officials remain cautious regarding Lincoln General’s ultimate financial stability. Life insurance firms like Lincoln suffered a great deal during the stock market crash of 2008 and 2009, but many have recovered, like Lincoln.

“The rating action is a result of Lincoln’s strengthened capital position following Kingsway’s capital raising initiatives and the infusion of new capital into Lincoln,” according to the A.M. Best officials. “A.M. Best remains concerned about Lincoln’s underwriting leverage position as well as its ability to effectively manage the additional volume of business. A.M. Best’s negative outlook reflects its concern that Lincoln may need additional capital by year-end if Lincoln continues to strain surplus through premium growth or if loss reserves continue to adversely develop.”

While some caution is necessary, officials for Lincoln General say they intend to keep the excellent financial strength rating and keeping all insurance interests sufficiently funded and potential claims paid on time. When life insurance products are underwritten, respective state laws require life insurance firms to adequately capitalize their holdings so they can assure policyholders of prompt payment if they have to file a claim.

“We are committed to maintaining our A.M. Best ratings and ensuring that our insurance subsidiaries are strongly capitalized,” said Bill Star, President and Chief Executive Officer, Lincoln General.

A.M. Best represents independent opinions of an insurer’s financial strength and ability to meet policyholder obligations. According to A.M. Best, companies rated as A and A- Excellent have an excellent ability to meet their ongoing obligations to policyholders.

Lincoln General Insurance offers a variety of life insurance products, including term life and whole life insurance products as well a variable life insurance and annuities. Term life insurance most often is used to protect temporary financial interests, such as buying a home, putting children through college or investing in a family business. Studies show most families in the United States would suffer a significant setback in lifestyle and quality of living if the head of household were to become disabled or killed from a covered peril. And term life insurance is an affordable way to protect families.

Whole life insurance is different from term life insurance, which is in effect for a fixed period and has lower premiums for similar coverage limits. Because most term life insurance plans do not result in a payout, it is affordable to buy term life insurance. But whole life insurance plans almost always result in a final payout, even if the insured party is alive at age 100, at which point a “lifetime” is said to have been lived and a final payout is made to the beneficiaries as determined by the policyholder. By Mike Heuer