AM Best

A.M. Best Withdraws Ratings of Texas Hospital Insurance Exchange


Robert E. Brokaw

Financial Analyst

(908) 439-2200, ext. 5771

Henry K. Witmer

Assistant Vice President

(908) 439-2200, ext. 5097
Rachelle Morrow

Senior Manager, Public Relations

(908) 439-2200, ext. 5378

Jim Peavy

Assistant Vice President, Public Relations

(908) 439-2200, ext. 5644


OLDWICK, N.J. - SEPTEMBER 17, 2013 12:00 AM (EDT)
A.M. Best Co. has affirmed the financial strength rating of B+ (Good) and the issuer credit rating of “bbb-” of Texas Hospital Insurance Exchange (THIE) (Austin, TX). The outlook for both ratings is stable. Concurrently, A.M. Best has withdrawn the ratings as the company has requested to no longer participate in A.M. Best’s interactive rating process.

The affirmation of THIE’s ratings reflects its supportive capitalization, the continued generation of operating profitability and judicious reserving practices. Also considered is THIE's business focus, which has led to high policyholder retention levels, favorable operating results and stronger capitalization. THIE also has benefited from prior year loss reserve releases over the last few years as loss trends have been better than what were originally anticipated.

These positive rating factors are partially offset by THIE's narrow spread of risk both geographically and by product, highly competitive operating environment, variability in surplus growth, elevated expense ratio levels, and previously high reinsurance dependence. THIE writes commercial insurance products to a select market of small and rural Texas hospitals.

The enhanced growth in surplus during 2005 resulted from the Texas Department of Insurance's (TDI) examination of THIE, concluding that a quota share reinsurance agreement, effective July 1, 2001 through August 31, 2004, did not transfer a proportionate share of risk. The necessary change from insurance accounting to deposit accounting has led to variability in reported data, with the creation of a deposit asset accompanied by a substantial increase in carried loss reserves and incurred losses. Another sizeable write down of the deposit asset and a true up of prior years’ reinsurance occurred in 2012, resulting in a reduction to surplus. THIE expects this asset to be completely off its books by the end of calendar year 2013.

The outlook is based on THIE's prospects of continued operating profitability and the maintenance of supportive capital.

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

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AMB# Company Name
003650 Texas Hospital Insurance Exchange