A.M. Best Lowers Rating for AFL Insurance

March 29, 2002

A.M. Best Co. announced that it has lowered the financial strength rating to B+ (Very Good) from B++ (Very Good) for AF&L Insurance Company of Warrington, Pennsylvania with a stable outlook.

Best explained that its action “reflects the significant operating loss and decline in capital and surplus AF&L reported in 2001, its increased reliance on reinsurance to help support its long-term care business and the numerous challenges the company has in being a small, long-term care provider.”

“A.M. Best believes AF&L will encounter difficulty returning to near-term profitability given the capital intensive nature of long-term care products. In three of the past four years, AF&L has reported operating losses. The 2001 loss was primarily driven by significant reserve strengthening and new business strain,” said the announcement.

The rating agency noted that CIVC Partners, a subsidiary of Bank of America, now has a controlling interest in AF&L, and had committed a further $20 million in addition to its original investment, if necessary.

Best indicated that the company’s “capital position is adequate for its current rating,” and noted that it has recently begun “enforcing stricter underwriting criteria to reflect the changing long-term care market,” and has “improved the quality and timeliness of industry data it is using to price and monitor its business.”|”a.m., best, lowers, rating, afl, insurance

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