Best’s News & Research Service - June 12, 2008 04:43 PM (EDT)
A.M. Best Upgrades Ratings of Heartland Fidelity Insurance Company
OLDWICK, N.J. //BestWire// - A.M. Best Co. has upgraded the financial strength rating (FSR) to B++ (Good) from B+ (Good) and issuer credit rating (ICR) to “bbb” from “bbb-” of Heartland Fidelity Insurance Company (Heartland) (Washington, D.C.). The outlook for both ratings is stable.
The ratings reflect Heartland’s consistent positive operating results, growth in capital and expanding product portfolio. Heartland has reported positive operating results with good net income margins for the last five years. This performance is closely related to Heartland’s core relationship with its affiliate, Benecard Services, Inc. Heartland’s retention of net income from operations has directly attributed to the growth and high level of capital and surplus. In 2007, Heartland entered into a quota risk arrangement with two insurance carriers. These arrangements are projected to be the main source of new revenue growth for the organization in the near term.
Offsetting rating factors include a very competitive pricing environment and concentration of Heartland’s current book. Heartland’s primary offerings are insured prescription drug products. The market for these products is highly competitive with large pharmacy benefit administrators (PBMs) and large regional and national health insurance plans all vying for business. Heartland also has a concentration of its current book of business in the local government market in New Jersey, which is very price sensitive due to budget constraints. While profitability is projected to continue, these factors have put downward pressure on underwriting margins.
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