AM Best Revises Outlooks to Stable for Heartland Fidelity Insurance Company; Affirms Credit Ratings

OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has revised the outlooks to stable from positive and affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of Heartland Fidelity Insurance Company (Heartland) (Washington, DC).

The ratings reflect Heartland’s balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.

The revision of the outlooks to stable reflects less favorable operating performance over the past year following a few years of significant growth. While operating performance remains adequate, Heartland’s margins narrowed during 2020 as the company experienced higher claims in its pharmacy business, resulting in higher loss ratios after record low levels for the past few years. The company expects loss ratios to revert to historical levels for 2021 and in the near to medium term. While earnings moderated in 2020, they remained positive underpinned by underwriting gains, supported by disciplined pricing and consistent investment gains. AM Best expects that Heartland’s earnings for 2021 will remain favorable, albeit slightly lower than prior years.

The retention of net gains has contributed to absolute capital and surplus growth over the years, which has remained at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), allowing Heartland to maintain its balance sheet strength. However, the investment portfolio for excess reserves above statutory requirements and above adequate working capital are exposed to an elevated level of equity holdings, which can subject it to market volatility.

Heartland’s business profile is limited primarily due to the concentration of premium development in New Jersey, as well as in the pharmacy and vision lines of business. However, the company relies on its pharmacy and vision program managers, which provides the support and opportunities for business prospects and gives Heartland a competitive advantage.

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