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LCBA’s risk-based capital ratio improved to 376% at
December 31, 2017 from 324% at December 31, 2016. This
increase is attributed to the growth in surplus
experienced in 2017, as LCBA’s risk-based capital
remained consistent with the prior year, dropping by
just under one percent.
In the PreNeed market, management continues to work
on improvements and made changes to the distribution and
service model at the end of the year in order to spur
future growth. Medicare Supplement premiums have shown
consecutive years of significant growth, but remain a
small percentage of overall net premiums.
The quality of LCBA’s investment portfolio remains
high with an average rating of "A" and over 98% of bonds
at investment grade. As anticipated, reinvestment rates
remained low in 2017, leading to a slight reduction in
book yield. Early in the year, LCBA took advantage of
improved market conditions to sell all of its
non-agency, mortgage-backed securities to further reduce
risk in its portfolio.
Commission expense increased significantly in 2017 on
the heels of strong sales growth of the new life product
line, to $3.6 million from $1.6 million in 2016, or an
increase of 122%. This follows a $950 thousand, 85%
increase in 2016.
General Expenses decreased 1.7% in 2017 and ended the
year under budget. Expenses were up 15% in 2016 due
primarily to the costs associated with the new product
line, which began development in the first quarter of
the year. Additionally, in 2016, LCBA completed its five
year Pennsylvania state insurance department examination
in 2016, which cost the Association approximately
$230,000 and resulted in a clean examination report.