AM Best has upgraded the Financial Strength Rating to A- (Excellent) from B++ (Good) and the Long-Term Issuer Credit Rating (Long-Term ICR) to a- from bbb+ of The Chesapeake Life Insurance Company (Chesapeake) (Oklahoma City, OK). The outlook of these Credit Ratings (ratings) is stable. These rating actions follow the acquisition of Chesapeake and its parent, HealthMarkets, Inc. (HealthMarkets) (headquartered in North Richland Hills, TX), by Golden Rule Financial Corp, a subsidiary of UnitedHealth Group Incorporated (UnitedHealth Group) [NYSE: UNH]. AM Best also has withdrawn the Long-Term ICR of bb+ with a stable outlook of HealthMarkets.
The ratings reflect Chesapeakes balance sheet strength, which AM Best categorizes as strongest, as well as its adequate operating performance, limited business profile and marginal enterprise risk management (ERM).
The rating upgrades reflect lift from Chesapeakes ultimate parent, UnitedHealth Group, which acquired HealthMarkets and its subsidiaries. Chesapeake and its affiliated distribution capabilities are expected to enhance the individual specialty operations of UnitedHealth Groups UnitedHealthcare operations.
Chesapeakes risk-adjusted capital is at the strongest level, as measured by Bests Capital Adequacy Ratio, and has been maintained at this level over the past few years based upon a trend of favorable operating results. Earnings have significantly improved over the past few years with return on equity of 20% or greater driven by better than expected claims experience, lower administrative expenses and increasing premiums.
Chesapeake has had a trend of favorable premium growth from increased sales by HealthMarkets Insurance Agency, Inc., Chesapeakes affiliated company and primary distribution channel. Chesapeakes supplemental insurance portfolio branded as SureBridge has a diverse suite of supplemental health and life products. AM Best expects that Chesapeakes ERM will benefit from that of its new parent organization.
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This press release relates to Credit Ratings that have been published on AM Bests 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 Bests Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Bests Credit Ratings. For information on the proper media use of Bests Credit Ratings and AM Best press releases, please view Guide for Media – Proper Use of Bests Credit Ratings and AM Best Rating Action Press Releases.
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