OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has upgraded the Financial Strength Rating (FSR) to B++ (Good) from B+ (Good) and the Long-Term Issuer Credit Rating (Long-Term ICR) to “bbb” from “bbb-” of Physicians Health Plan of Northern Indiana, Inc. (PHP) (Fort Wayne, IN). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect PHP’s balance sheet strength, which AM Best categorizes as strong, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management.
The upgrade of the ratings reflect the trend of balance sheet strengthening for the company. PHP’s risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio, increased materially over the past two years based on retained earnings and a decline in business risk. The company exited the individual line of business after the end of the 2016 benefit year, which drove a decrease in risk premiums and a marked improvement in operating results that was the main driver of capital and surplus growth. Premium growth resumed over the past year as the company reported enrollment gains in its small group business. The company’s fee revenue from its third party administration business also has increased.
PHP rebalanced its investment portfolio in 2018, which drove an increase in investment income and realized gains for the year. PHP’s investment portfolio equity exposure declined as the allocation shifted from single-issue equities to mutual funds and fixed-income securities. However, as part of the change in investment strategy, the fixed-income portfolio credit quality changed from predominately NAIC 1 bonds to an equal mix of NAIC 1 and NAIC 2 bonds.
Partially offsetting these positive rating factors is PHP’s business concentration in the small to mid-size group commercial segment in the company’s core service area of Northern Indiana. PHP’s service area is aligned with its network of sponsoring providers. PHP does not have a material market share and it faces competition from large national carriers. Furthermore, the company is exposed to regulatory risk as about two-thirds of its small group business is in the Affordable Care Act (ACA) compliant products.
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 Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.
AM Best is a global rating agency and information provider with a unique focus on the insurance industry. Visit www.ambest.com for more information.
Copyright © 2019 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.