[February 21, 2013]

A.M. Best Upgrades Ratings of Medico Insurance Company

A.M. Best Co. has upgraded the financial strength rating (FSR) to B++ (Good) from B+ (Good) and issuer credit rating (ICR) to "bbb" from "bbb-" of Medico Insurance Company (Medico). The outlook for both ratings is stable. Medico is a subsidiary of American Enterprise Group Inc. (American Enterprise) (Des Moines, IA), which is the intermediate holding company in the organization's mutual holding company structure.

A.M Best also has affirmed the FSR of A- (Excellent) and ICRs of "a-" of American Republic Insurance Company (American Republic) (Des Moines, IA) and its subsidiary, American Republic Corp Insurance Company (American Republic Corp), as well as World Insurance Company (World) and its subsidiary, World Corp Insurance Company (World Corp) (collectively known as American Enterprise Group). American Republic and World also are direct subsidiaries of American Enterprise. The outlook for these ratings is negative. All companies are domiciled in Omaha, NE, unless otherwise specified.

The rating upgrades reflect Medico's merger with American Enterprise effective July 1, 2012 and its intercompany reinsurance agreement with World, effective as of July 1, 2012. The merger will provide an expense synergy for Medico, as well as a growth opportunity in the senior market for American Enterprise. Medico will continue to operate as a single entity in Nebraska under its present name and will continue to sell Medico products through its independent agents.

The rating affirmations recognize American Enterprise Group's solid risk-adjusted capital position and its established history of marketing Medicare supplement products to niche markets mostly in the Midwest.

American Republic Corp and World Corp's ratings reflect the explicit support each company receives from American Republic. This is evidenced by the material quota share reinsurance and capital support agreements with the two companies and American Republic. However, the organization's exit from the individual major medical business, which previously represented a sizable portion of total premium revenue, has resulted in a reliance primarily on the Medicare supplement business. While the exit from the individual major medical business significantly reduced American Enterprise Group's exposure to regulatory and market risks, overall, it is now more singly exposed to regulatory and market risks associated with the Medicare supplement business, as well as increased competition from larger, more aggressive carriers.

A return to a stable outlook could occur if American Enterprise Group diversifies into additional business lines, which would provide it meaningful revenue and profitability, and if there is a significant improvement in its operating results from core lines. Factors that could result in negative rating actions include American Enterprise Group experiencing a significant deterioration in operating performance, a decline in risk-adjusted capital or a diminished business profile in the future.

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.

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