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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - AUGUST 22, 2001 01:26 PM (EDT)
A.M. Best Co. has raised the financial strength rating of B+ (Very Good) to B++ (Very Good) for Homeshield Insurance Company, Oklahoma City. This rating action reflects the company's consistent statutory profitability over the last five years and favorable capital and surplus position relative to risk exposure. Also, Homeshield has the implied support and strength of its parent, a captive fee income stream generated through distribution outlets associated with affiliated financial institutions and a liquid and high quality investment portfolio. Additionally, the rating considers Homeshield 's limited operating profile, lack of significant direct premiums written and its reliance on affiliated MidFirst Bank and Midland Mortgage for revenue generation.
Homeshield enjoys a strong base of fee income business associated with an affiliated mortgage loan servicing company. In recent years, this mortgage servicing business has grown considerably, enabling Homeshield to more than double its net operating gain. Furthermore, the accidental death benefit line, a major source of net premiums, has produced significant increases to net operating gains with improved experience over the same period. Therefore, in each of the last five years, the company has reported double-digit growth to its capital and surplus position. The favorable earnings performance, combined with a very high quality and short duration investment portfolio, have enabled Homeshield to maintain a favorable risk-adjusted capitalization position.
While net gains from operations remain dependent on the fee income from servicing mortgage loan portfolios of the affiliated company, Homeshield has gradually undergone a conversion of its revenue stream from fee income to premium income. Homeshield does maintain a fairly concentrated focus, as coverages are either assumed from the Assurant Group, Aegon and Liberty Life, or written in conjunction with its affiliate financial services organization, the Midland Group. Fee income and new premium income growth has come through mortgage servicing acquisitions within the Midland Group. Its ancillary credit insurance operations have contributed positively to operating earnings, but has experienced a declining premium trend and is not expected to grow in the future.
A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source.