|[November 16, 2012]
A.M. Best Affirms Ratings of Independence Holding Company and Its Subsidiaries
OLDWICK, N.J. --(Business Wire)--
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) and Independence American Insurance Company (Independence
American) (New Castle, DE). Concurrently, A.M. Best has affirmed
the ICR of "bbb-" of the parent company, Independence Holding Company
(Independence Holding) (headquartered in Stamford, CT) [NYSE: IHC]. The
outlook for all ratings is stable.
The ratings reflect the group's established position in employer
stop-loss, consistent profitability and improved capitalization at the
operating companies. Independence Holding continues to execute its
strategic business plan, which entails improving organizational
effectiveness by eliminating underperforming distributors and
consolidating affiliated managing general underwriters. Another facet of
the group's niche strategy is to selectively expand its product
portfolio, emphasizing lines that are expected to be only marginally
impacted by the Patient Protection and Affordable Care Act (PPACA).
Recent offerings include critical illness, mini-medical, hospital
indemnity and new limited benefits and pet insurance from Independence
The ratings also reflect the steady operating earnings provided by
Independence Holding's insurance entities, facilitated by strong
relationships with varios partners across its lines of business. Within
the organization, earnings continue to improve driven by increased
medical stop-loss sales and conservative underwriting, which has
resulted in low loss ratios. A.M. Best notes that the insurance
subsidiaries within Independence Holding have been placing 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. Moreover, the insurers'
investment portfolios have benefitted from notable de-risking, where
certain securities were divested in favor of greater quality assets
while maintaining a high degree of liquidity.
While operating earnings within Independence Holding and its
subsidiaries are trending favorably, A.M. Best remains concerned about
the lack of growth within some of its core products segments. A.M. Best
notes that the restructuring of distributors, stricter underwriting
guidelines, competitive pressures and regulatory uncertainties are
constraining growth within the organization's group major medical,
short-term medical, group life, short-term disability and group
long-term disability lines of business.
Furthermore, A.M. Best notes that Independence Holding's financial
leverage is quite manageable, and interest coverage is strong at roughly
A.M. Best believes Independence Holding and its affiliates are well
positioned at their current rating levels in the near to medium term.
Factors that may lead to negative rating actions include a prolonged
declining trend in net premiums within the organization's core lines of
business, material deterioration of risk-adjusted capital within the
insurance subsidiaries, or if significant realized losses materially
impact the profitability of the group.
The methodology used in determining these ratings is Best's Credit
Rating Methodology, which provides a comprehensive explanation of A.M.
Best's rating process and contains the different rating criteria
employed in the rating process. Best's Credit Rating Methodology can be
found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is the world's oldest and most
authoritative insurance rating and information source. For more
information, visit www.ambest.com.
Copyright © 2012 by A.M. Best Company, Inc. ALL RIGHTS
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