FEBRUARY 06, 2015 11:18 AM (EST)
A.M. Best Upgrades Ratings of Medico Insurance Company; Affirms the Ratings of American Enterprise Subsidiaries
FOR IMMEDIATE RELEASE
OLDWICK - FEBRUARY 06, 2015 11:18 AM (EST)
The rating upgrades reflect the further integration of Medico with American Enterprise through operational support and common strategy, as well as the intercompany reinsurance agreement with American Republic since July 2012. Additionally, starting in 2015, American Republic became the only reinsurer of Medico's new business as the agreement with another carrier has been terminated. Medico's financial results and the level of risk-adjusted capitalization improved substantially following the establishment of the reinsurance agreement with American Republic. A.M. Best expects Medico to remain an important part of American Enterprise's strategy of growing Medicare supplement as well as ancillary lines of business through its independent distribution, which differs from the distribution of American Republic.
The rating affirmations of American Republic, American Republic Corp and Medico Corp recognize American Enterprise subsidiaries' strong earnings, excellent risk-adjusted capital position and the successful completion of their exit from the major medical line of business that started in 2011. American Enterprise continues to grow its Medicare supplement products while diversifying its business mix through ancillary medical lines. However, A.M. Best is concerned that recently intensified competition in the senior markets combined with anticipated higher administrative expenses due to investments in business and distribution growth may pressure future earnings.
Factors that could result in positive rating actions include significant further business diversification of American Enterprise subsidiaries, a trend of revenue and income growth, while maintaining high risk-adjusted capitalization. Factors that could result in a negative rating action include the group experiencing a significant deterioration in financial performance, a substantially decreased risk-adjusted capital position or a diminished business profile. Negative rating actions for Medico could occur if it has a declined strategic role for the consolidated organization, lack of the support from the parent, the loss of inter-company reinsurance, or a trend of operating losses beyond A.M. Best's expectations.
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.
Key insurance criteria reports utilized:
This press release relates to rating(s) 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 visit A.M. Best's Ratings & Criteria Center.
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