News Column

A.M. Best Revises Outlook to Positive for Heartland Fidelity Insurance Company

June 10, 2014



OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Best has revised the outlook to positive from stable and affirmed the financial strength rating of B++ (Good) and the issuer credit rating of “bbb+” of Heartland Fidelity Insurance Company (Heartland Fidelity) (District of Columbia).

The revised outlook reflects Heartland Fidelity’s continued profitable underwriting results, premium growth and increased business diversification. Heartland Fidelity has been able to successfully control claims costs through careful formulary management and underwriting discipline based on proprietary rating models. In addition, over the past two years, Heartland Fidelity benefited from a lower loss ratio in its prescription line of business as the share of generic drugs was higher than projected. Premium growth, which has slowed down over the past three years as regulatory uncertainties prevented employer groups from making changes to their benefits, is expected to increase significantly in 2014 and 2015 following the transfer of vision premiums from an affiliate. Growth in the vision block of business should reduce Heartland Fidelity’s reliance on its large book of New Jersey public employers' prescription drug contracts, as well as add to further geographic diversification.

Offsetting rating factors are business concentration and the expected decline in Heartland Fidelity’s profitability as its product mix changes. Heartland Fidelity expects profitability to moderate in the near to medium term following the expansion of the vision block of business where the loss ratio is higher. While Heartland Fidelity’s business diversification has increased considerably compared with prior years of operation, A.M. Best remains concerned that the company’s share of public sector business is expected to remain at around 70%.

Factors that may lead to positive rating actions include further reduction in Heartland Fidelity’s business concentration, sustainability of earnings and capitalization and premium growth. Factors that may lead to negative rating actions include deterioration in the company’s operating performance, a substantial decline in capitalization or significant changes in its relationships with affiliates.

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2014 by A.M. Best Company, Inc.ALL RIGHTS RESERVED.





A.M. Best Company

Doniella Pliss, 908-439-2200, ext. 5104

Senior Financial Analyst

doniella.pliss@ambest.com

or

Sally Rosen, 908-439-2200, ext. 5280

Assistant Vice President

sally.rosen@ambest.com

or

Jim Peavy, 908-439-2200, ext. 5644

Assistant Vice President, Public Relations

james.peavy@ambest.com


Source: A.M. Best Company


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