IHC Insurance Group Receives Good Rating from A.M Best

Published: Wed 23 Dec 2009

Perry Begay

A.M. Best Co. granted the rating of A- (excellent) to Standard Security Life Insurance Company of New York, Madison National Life Insurance Company and Independence American Insurance Company as a reflection of their financial strength.

The three members of the Independence Holding Company insurance group benefited from IHC's decision to improve loss ratios in a "soft" market. That positive result occurred by being more select with medical stop-loss underwriting in addition to individual and small group major medical coverage. In turn, there have been improved operating earnings for the year.

Stop-loss is the price at which a stock is automatically sold to protect an investor against further losses.

Simultaneously, life insurance premiums charged by the three insurers have decreased. As a way to offset the income from premiums, they used captive distribution to expand their product lines, including individual and small group major medical, dental and vision. All of these markets have been extremely competitive, according to A.M. Best.

In addition Standard Security Life and Madison Life sell group long and short-term disability. Also, Standard Security Life handles limited medical and managed health care products.

Independence American Insurance Company is principally involved in the insurance and reinsurance business.

As credit spreads widened in 2008 and early 2009, Independence Holding went through deterioration of its own investment portfolio. By repositioning of the portfolio and tightening the spread, the company cut its unrealized loss position.

"We are pleased that A.M. Best has affirmed our group rating of A-," said Roy Thung, Independence Holding's CEO. "In doing so, A.M. Best has recognized our improved operating earnings and the expansion of our fully insured products, including individual and small group major medical, dental and vision, primarily through controlled distribution."

Thung added that the stockholder's equity of $221 million at the end of the third quarter is at the same level it was before the economic crisis began. "We are confident that our improved operating results will continue in 2010," he said.

Although Independence Holding's consolidated risk-adjusted capital is sufficient and there has been improvement in the portfolio, A.M. Best has concerns. With the world's economic status still uncertain, any negative ratings of the company's investment portfolio or more losses could add to the strain on its capital.

Therefore, A.M. Best will continue to monitor the insurance group's performance and its investment portfolio. In particular, A.M. Best is concerned about improvement in the results from Madison National Life.