A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) and issuer credit ratings (ICR) of “a-” of Madison National Life Insurance Company, Inc. (Madison National) (Madison, WI), Standard Security Life Insurance Company of New York (Standard Security) (New York, NY) and Independence American Insurance Company (Independence American) (New Castle, DE), all subsidiaries of Independence Holding Company (Independence Holding) (headquartered in Stamford, CT) [NYSE: IHC]. Concurrently, A.M. Best has affirmed the ICR of “bbb-” of Independence Holding. The outlook for all ratings is stable.
The ratings reflect the group’s consistent profitability, the execution of its business strategy and its more than adequate risk-adjusted capitalization. Independence Holding’s insurance operating companies, facilitated by strong relationships with various partners, continue to generate fairly consistent operating earnings across its many lines of business. Earnings continue to improve driven by increased medical stop-loss and group major medical sales in addition to more conservative underwriting, which has resulted in lower loss ratios. A.M. Best notes that Independence Holding’s insurance subsidiaries continue to place increasing emphasis on business written through controlled distribution. These efforts have enabled Madison National, Standard Security and Independence American to generate more consistent operating results and enhance the organization’s capital position.
The ratings also reflect the implementation of Independence Holding’s strategic business plan to facilitate premium growth, which entailed selectively expanding its product portfolio and emphasizing lines that were expected to be only marginally impacted by the Patient Protection and Affordable Care Act. Recent product offerings include pet insurance, international medical and non-subscriber occupational accident from Independence American. The strategic business plan also included improving organizational effectiveness by eliminating underperforming distributors and consolidating affiliated managing general underwriters to improve profitability.
While operating earnings are trending favorably and the group’s overall capitalization has been steadily improving, A.M. Best remains cautious regarding how the significant increase in net premiums in 2013 will impact the capitalization of the subsidiaries. A.M. Best notes that both Standard Security and Independence American both reported lower risk-adjusted capitalization in 2012 due to new business strain and the payment of stockholder dividends. While A.M. Best expects these trends to continue for the remainder of 2013, risk-adjusted capitalization as measured by Best’s Capital Adequacy Ratio (BCAR) is expected to remain above the minimum guidelines for the ratings. A.M. Best will continue to monitor the impact of new business strains and how Independence Holding will utilize its capital going forward.