Best’s News & Research Service - February 04, 2022 09:34 AM (EST)
AM Best Revises Outlooks to Positive for BEST Life and Health Insurance Company
- February 04, 2022 09:34 AM (EST)
Oldwick //BestWire// - AM Best has revised the outlook to positive from stable and affirmed the Financial Strength Rating (FSR) of B+ (Good) and the Long-Term Issuer Credit Rating of “bbb-” (Good) for BEST Life and Health Insurance Company (BEST Life) (Austin, TX).
These Credit Ratings (ratings) reflect BEST Life’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, limited business profile and marginal enterprise risk management (ERM).
Contributing to the positive Long-Term ICR outlook is BEST Life’s improvement in ERM, which AM Best expects to continue into the near to medium term. BEST Life has historically maintained a largely informal ERM program, as the company’s small size and low risk tolerance allowed executives to oversee risks and controls. However, in 2021, BEST Life improved formal elements of ERM, such as risk identification, measurement tools, stress testing and oversight by its board of directors. AM Best expects a further trend of ERM formalization and integration into organizational strategy and will continue to monitor to ensure the appropriateness of the program.
BEST Life experienced growth in capital and surplus, consistent risk-adjusted capital and moderating risk in invested assets in 2020 and through the first nine months of 2021. AM Best expects that the balance sheet metrics will be maintained or improved in the near to medium term. BEST Life has the strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). The organization reported a high single-digit compound annual absolute capital growth over a five-year period (2016-2020), primarily driven by retained earnings. This growth rate in capital continued through the first nine months of 2021. The group has maintained favorable overall liquidity despite lacking access to external sources of operating liquidity. Constraining the balance sheet assessment is the modest level of absolute capital and surplus, and limited financial flexibility due to a lack of access to external sources of financing if additional capital is required.
BEST Life has reported positive albeit fluctuating operating results over the past five years. Profitability was unusually high in 2020, due to the closure of dental offices in the spring as COVID-19 pandemic related economic restrictions were instituted, and the company managed to report moderate premium growth despite a difficult sales environment. Growth in individual dental products more than offset challenging conditions in the group market. Profitability moderated toward pre-pandemic levels through the first nine months of 2021, but growth remained positive as the individual segment continued to drive enrollment. BEST Life has generated moderate growth and profitability over the past five years, displaying the ability to navigate a difficult market environment. AM Best expects individual dental products to continue to drive the majority of premium growth as the group segment remains highly competitive.
BEST Life, a Texas domiciled insurer, is licensed in 39 states and the District of Columbia, but 60% of its direct premium is derived from its top 10 states. Best Life’s total premiums remain modest and the company does not have a material market share in any geography. However, BEST Life has been able to grow its individual dental products on the Affordable Care Act (ACA) exchanges and in 2020 introduced an off-exchange product distributed by General Agency Center. As of year-end 2020, Dental products comprised 96% of total premium, with group 44% and individual (ACA and off-exchange) business comprising 55%.
This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.