A.M. Best Revises Outlook to Stable for American Republic Insurance Company and Its Subsidiaries

A.M. Best Co. has revised the outlook to stable from negative and affirmed the financial strength rating (FSR) of A- (Excellent) and issuer credit ratings (ICR) of "a-" of American Republic Insurance Company (American Republic) (Des Moines, IA) and its subsidiaries, American Republic Corp Insurance Company (American Republic Corp) (Omaha, NE) and Medico Corp Life Insurance Company (Medico Corp) (Omaha, NE), formerly known as World Corp Insurance Company.

American Republic is a direct subsidiary of American Enterprise Group Inc. (American Enterprise) (Des Moines, IA), which is the intermediate holding company in the organization's mutual holding company structure.

Additionally, A.M. Best has affirmed the FSR of B++ (Good) and upgraded the ICR to "bbb+" from "bbb" of Medico Insurance Company (Medico) (Omaha, NE). The outlook for both ratings is stable. Medico is a subsidiary of American Enterprise.

The revision of the outlook to stable for American Republic and its subsidiaries reflects the organization's continued profitability, improved risk-adjusted capital position and its established history of marketing Medicare supplement products to niche markets, mostly in the Midwest. The organization's exit from the individual major medical line of business began in 2011 and has been smoothly managed while executing favorable financial results. The exit is almost complete and the majority of the business will be gone in 2014. This has significantly reduced the organization's exposure to regulatory and market risks. However, American Republic's exit from the individual major medical business, which previously represented a sizable portion of total premium revenue, has resulted in a reliance primarily on the Medicare supplement business. The organization is now more singly exposed to regulatory and market risks associated with the Medicare supplement business, as well as increased competition from larger, more aggressive carriers. American Republic Corp and Medico Corp's ratings reflect the explicit support each receives from American Republic. This is evidenced by the material quota share reinsurance and capital support agreements with the two companies and American Republic.

The upgrading of the ICR for Medico reflects its improvement in operating performance and risk-adjusted capitalization and the synergies it is achieving from its integration with American Enterprise, as well as its intercompany reinsurance agreement with American Republic. Medico will continue to operate under its present name and continue to sell products through its independent agents.

Given the revision of the outlook to stable from negative, positive rating movement is unlikely in the near to medium term. Factors that could result in a negative rating action include a significant deterioration in operating performance, a decline in risk-adjusted capital or a diminished business profile in the future.

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