OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has affirmed the financial strength rating of B++ (Good) and the issuer credit rating (ICR) of “bbb” of The Chesapeake Life Insurance Company (Chesapeake) (Oklahoma City, OK), the core insurance subsidiary of HealthMarkets, Inc. (HealthMarkets) (headquartered in North Richland Hills, TX). Additionally, A.M. Best has affirmed the ICR of “bb” of HealthMarkets. The outlook for each rating is stable.
The rating affirmations reflect Chesapeake’s more-than-adequate risk-adjusted capitalization and trend of premium growth. The ratings also reflect the implementation of the organization’s change in business strategy over the past few years, which has shifted focus to supplemental insurance plans underwritten exclusively by Chesapeake under the name, SureBridge. The growth of Insphere d/b/a HealthMarkets Insurance Agency, Chesapeake’s affiliated company and distribution channel, combined with the growth of third-party agency distribution, has enabled Chesapeake to realize significant premium growth in recent years.
A.M. Best remains concerned about the lack of profitability at HealthMarkets on a consolidated basis. The losses have been driven by a decline in its premium revenue, attributable to the exit from major medical, net investment income and ongoing capital investment in Insphere. Furthermore, A.M. Best is concerned about the high level of financial leverage and the absence of interest coverage on a consolidated basis due to ongoing operating losses. While the organization’s adjusted financial leverage ratio considerably improved compared with the past, A.M. Best notes that HealthMarkets’ unadjusted financial leverage of more than 50% remains high relative to other companies of its size.
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