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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - MAY 22, 2003 12:00 AM (EDT)
A.M. Best Co. has assigned an initial financial strength rating of B (Fair) to Physicians Health Plan of Northern Indiana, Inc. (PHPNI) (Fort Wayne, IN). The rating outlook is stable.
The rating reflects PHPNI's position as a niche player in the northeastern region of Indiana, a diversified distribution network, a strong integrated provider network and a distinctive operating profile. Offsetting these strengths are persistently unfavorable underwriting performances, divergence between strong premium growth and reduced capital levels, diminished investment returns and its susceptibility to both geographic and legislative risks.
PHPNI has exhibited good premium growth, which is complemented by a strong provider network, price increases and a competitive management strategy. For its size, the company controls a measurable percentage of the managed care business in the Allen County region in northeastern Indiana. PHPNI's physician controlled operating profile and product bundling mechanism makes it attractive to small group insurance buyers, which is a formidable barrier for competitors to overcome.
PHPNI competes on price and high quality services, while managing periodic financial results to near break-even levels. This impact has limited capital development even at a time when the health insurance industry is experiencing strong earnings growth. Increasing underwriting leverage usually serves as a precursor to weakening capital. Underwriting performance has been unfavorable, while capital growth continues to slide. The prolonged turbulence of the financial markets has created a shortfall in planned investment income, which has had an unfavorable effect on PHPNI's net income.
A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source.