OLDWICK, N.J.--(BUSINESS WIRE)--
A.M. Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term 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) (Wilmington, DE), all subsidiaries of Independence Holding Company (Independence Holding) (headquartered in Stamford, CT) [NYSE:IHC]. Concurrently, A.M. Best has affirmed the Long-Term ICR of “bbb-” of Independence Holding. The outlook for these Credit Ratings (ratings) is stable.
The ratings of the core operating affiliates of Independence Holding reflect the group’s more-than-adequate level of risk-adjusted capital, focus on diversified premium growth and continued profitability. The group's consolidated risk-adjusted capital position, as measured by Best's Capital Adequacy Ratio (BCAR), has remained strong for the last five years and has been supported by a trend of favorable earnings. More recently, the proceeds from the sale of the organization’s stop-loss business increased capital while decreasing the premium base, particularly at Standard Security. While there is a possibility for sizeable dividend from that entity to the holding company in the near term, A.M. Best expects the level of risk-adjusted capitalization to remain more than adequate to support the organization’s risks. Over the last several years, the group has been transitioning from a primarily major medical and stop-loss writer to a specialty benefits writer with fully insured ancillary medical offerings, including limited medical, short-term medical, critical illness, non-subscriber occupational accident and pet insurance. While revenue from these new insurance products is expected to remain significantly lower compared with the major medical and medical stop-loss premium written prior, the organization is focused on underwriting and pricing discipline for continued profitable growth.
Following the sale of the stop-loss block of business, the company's business profile has weakened, as the stop-loss business represented more than 40% of the organization's combined premium in 2015. This has negatively impacted operating results, evidenced by a 27% decline in net income year over year through the third quarter of 2016. However, excluding the impact of the sale of the annuity block of business at Madison National in 2015, net income declined by 10%. A.M. Best is concerned that near-term future earnings will continue to be pressured due to a lack of scale and the highly competitive marketplace as midsize and large carriers are looking toward the supplemental health segment for additional sources of revenue. However, the organization is more than sufficiently capitalized to support the existing risks and potential future growth, as well as withstand possible earnings fluctuations.
This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings.
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