Financials

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.