AM Best has revised the outlook to negative from stable for the Long-Term Issuer Credit Rating (Long-Term ICR) and affirmed the Financial Strength Rating (FSR) of B++ (Good) and the Long-Term ICR of “bbb+” (Good) of CICA Life Insurance Company of America (CICA). The outlook of the FSR is stable.

The Credit Ratings (ratings) reflect CICA’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).

The negative outlook on the Long-Term ICR reflects pressure on CICA’s balance sheet strength metrics due to new business strain, which is the result of its strategic growth initiatives. Additionally, the company’s strong level of risk-adjusted capitalization may be pressured if operating losses persist for longer than it anticipates.

CICA’s balance sheet strength is driven by its strong level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). The company maintains a strong liquidity position that is within industry averages. Liquidity is enhanced by a $10 million of Federal Home Loan Bank (FHLB) lending capacity and $20 million in a bank line of credit. These sources are a liquidity backstop with no operating leverage taken at this time. The company has a conservative investment portfolio, with a majority of assets being held in investment grade fixed income.

Operating performance has been challenged over the last three years due to increasing underwriting expenses. As CICA continues to grow, statutory strain is expected to limit profits over the near term. Over time, performance should stabilize once these new policies turn profitable. Investment earnings have been adequate and consistent over the last five years.

CICA is licensed in 43 states (plus the District of Columbia) with over 45,000 policies and the company is primarily concentrated in the southern United States, with an emphasis on the Hispanic population.

CICA utilizes an ERM strategy that is appropriate for its size and scale of operations, as well as the risks carried on its balance sheet. Over the near term, CICA is expected to develop a more formal ERM program to match its increasing operating risks.

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