Medico, American Enterprise Merger Aims to Double Senior Business

American Enterprise Group Inc. is hoping to double new business in the senior market by merging with Medico Insurance Co.

American Enterprise's total business in the senior market would increase by a third, the company said in a statement.

"This is a growth opportunity for American Enterprise," said Michael E. Abbott, president and chief executive officer of American Enterprise. "We will be able to more rapidly increase market penetration."

The merger would strengthen long-term growth for Medico, Timothy J. Hall, Medico president and chief executive officer, said in a statement.

American Enterprise is based in Des Moines, Iowa and Medico is based in Omaha, Neb. Medico sales, sales support, marketing and product development will remain in Omaha. All other functions will be consolidated within American Enterprise's existing organizational structure, American Enterprise said.

American Enterprise is a holding company that serves the senior market through American Republic Insurance Co. As of Sept. 30, American Enterprise and Medico would have combined revenues of $476 million, surplus of $471 million and assets of $951 million, according to an American Enterprise statement.

American Republic currently has a Best's Financial Strength Rating of A- (Excellent) and Medico has a rating of B- (Fair).

A.M. Best Co. said on Jan. 20 American Enterprise's rating was unchanged by news of the merger. The transaction will allow American Enterprise to diversify and expand in the senior marketplace, A.M. Best said. The merger will also provide expense synergy for American Enterprise in the long run and its solid risk-adjusted capital position is expected to be maintained (Best's News Service, Jan. 20, 2012).

A.M. Best said it placed Medico's rating under review with positive implications until the transaction is completed.

Medico's net premiums written were $18.6 million in 2009 and $26.7 million in 2010. The company's net losses were $4 million in 2009 and $5.3 million in 2010, according to BestLink. American Republic's net premiums written were $399.7 million in 2009 and $362.8 million in 2010. It had a net income of $19 million in 2009 and $32.6 million in 2010.

Two American Enterprise subsidiaries, American Republic and World Insurance Co., last year pulled out of the Florida market because of regulatory changes to related to minimum medical loss ratios (Best's News Service, Oct. 28, 2011).

(By Michael Buck, senior associate editor, BestWeek: Michael.Buck@ambest.com)