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FOR IMMEDIATE RELEASE
OLDWICK - NOVEMBER 03, 2022 10:49 AM (EDT)
AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of Independence American Insurance Company (IAIC) (Wilmington, DE). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect IAIC’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM). The ratings also reflect support from the ultimate parent, JAB Holding Company s.à.r.l. (JAB Holding).
On June 20, 2022, JAB Holding, IAIC’s ultimate parent, announced the $1.4 billion - comprised of $1.15 billion cash and $250 million in seller notes - acquisition of Fairfax Financial Holdings Limited’s (Fairfax) interest in Crum & Forster Pet Insurance Group, which included Pethealth Inc., and their operations. Furthermore, as part of the transaction, Fairfax would invest $200 million to partner with JAB Holding through its latest consumer fund. The transaction, closed on Oct. 31, 2022, is expected to increase IAIC’s market share significantly, with premium projected to grow substantially through year-end 2022 and over the next two years as business is added.
The ultimate parent, JAB Holding, invests in premium consumer brands and industries, including the pet insurance business. The ultimate parent also provides broadened financial flexibility and access to additional explicit and implicit capital support as needed.
The balance sheet strength reflects IAIC’s strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), as well as conservative investments and adequate reserves. While the expected increase in premium over the next two years might temporarily pressure IAIC’s risk-adjusted capitalization, as measured by BCAR, JAB Holding is expected to support the strongest level of risk-adjusted capital via contribution as needed to support the growth, new business strain and provide stability. IAIC’s operating performance is assessed as adequate and has been supporting the growth trend in absolute capital and surplus over the past two years. The company’s operating earnings have remained stable but are expected to increase following the acquisition, with loss ratios expected to fluctuate in the mid-to-upper 50% range. Conversely, the expense ratios are expected to improve somewhat, benefiting from higher top-line growth, which the company expects to be in the high teens over the next few years. AM Best assesses IAIC’s business profile as limited given the monoline nature of the business; however, this transaction accelerates the company’s strategic goals to become a major player in the pet health insurance and related services space, which is facilitated further by IAIC’s existing capabilities and network. AM Best assesses IAIC’s ERM program as appropriate. The plan, which sets forth a strong risk culture and governance, along with ongoing discipline and risk identification, has continued to evolve over the past year, adding more sophisticated risk and contingency plans around the pet insurance business.
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 Performance Assessments, 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.