Life-Sustaining Measures

Black insurance companies search for strategies to halt the erosion of their ranks

expenses, re-engineered their business plans and created new products. And the changes they’ve made and are continuing to make are slowly boosting each firm’s premiums and profits. Their success should be instructive to other NIA companies.

Of course, these black-owned firms really don’t have a choice. They do business in an era of financial Darwinism. And their CEOs know if their institutions don’t adapt, they’ll either die or be forced to merge with black or white firms that know how to survive.

In recent years, the growth of black-owned insurance firms has been stagnant. In 1995, the top 10 firms totaled assets of $688 million; last year, assets totaled $689 million. In addition, the premium income (the money they make from policies) of these firms has dropped from $161 million in 1995 to $143 million in 1997. The value of the top-10 firms’ insurance in force has also been erratic, increasing from $18.4 billion in 1995 to $18.7 billion in 1996, then dropping off to $17.9 billion in 1997. Strategies used by North Carolina Mutual, Atlanta Life Insurance Co. and Golden State Mutual Life Insurance Co. may hold the keys to reversing these trends.

Two companies, Standard & Poor’s and A.M. Best, (the oldest insurance rating company in the industry), rate the financial strength of insurance firms. S&P also judges how well companies will meet their insurance policyholder obligations. Higher-rated firms are seen as more likely to fulfill their obligations by paying claims.

In 1997, S&P analyzed only seven NIA companies. The ratings in S&P’s “secure” range extend from “AAA” to “BBB.” A “q” next to the rating shows it is based solely on quantitative analysis of financial data.
Last February, North Carolina Mutual received an “Aq,” the highest rating of the NIA group. It was in the good range, but its capacity to meet obligations was deemed “somewhat susceptible to adverse economic and underwriting conditions.” These may include recession or other economic changes that could decrease the sale of life insurance policies.

The secure range low rating is “BBB.” Williams-Progressive Life & Accident Insurance Co. in Opelousas, Louisiana (No. 8 on the BE INSURANCE COMPANIES list with assets of $8.3 million), got a “BBBq” rating. S&P says the firm has adequate financial security, but its potential to meet obligations is “susceptible to adverse economic and underwriting conditions.”

The S&P’s “vulnerable range” includes ratings from “BB” to “CCC.” The second largest NIA company, Atlanta Life, had a “BBq” rating. Its financial security may be adequate, but its capacity to meet long-term policy obligations was seen as “vulnerable to adverse economic and underwriting conditions.”

Four other NIA companies, Golden State, Reliable Life, Universal Life and Winnifield Life, all ranked at the “Bq” level. Their potential to fulfill obligations was “particularly susceptible to adverse economic and underwriting conditions.”

The “B” level is a step above “CCC,” which indicates “extremely vulnerable financial security.” No NIA firms were rated at this level.

Bert Collins, North Carolina Mutual’s president and CEO, is sure his company will succeed in its second

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