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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - AUGUST 16, 2002 12:00 AM (EDT)
A.M. Best Co. has lowered the financial strength rating to B+ (Very Good) from B++ (Very Good) of National Health Insurance Company (NHIC) (Grand Prairie, TX), with a negative outlook. The rating action reflects the consolidated organization's investment risk and continued statutory operating losses.
National Health Corporation, the holding company for NHIC and The Capitol Life Insurance Company, maintains non-investment grade bonds equating to more than 200% of capital and surplus on its statutory balance sheet as of first quarter 2002. Additionally, National Health divested $4.2 million of notes and senior debt issued by MCI WorldCom for a loss of $2.5 million, or almost 6% of its surplus as of first quarter 2002.
The impact of this investment-related write-down was exacerbated further by the corporation's $2 million consolidated statutory operating loss during the first quarter. In A.M. Best's opinion, the potential for default risk to impact policyholder surplus negatively-coupled with continued operating losses-has reached a level not commensurate with the previous financial strength rating. Furthermore, the persistence of these risks into the medium term place the current financial strength rating under additional pressure, reflecting the negative outlook.
The Capitol Life Insurance Company's (Colorado) financial strength rating of NR-3 (Rating Procedure Inapplicable) remains unchanged, reflecting the run-off of its mature book of annuities.
A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source.