AM Best Improves Texas Hospital Insurance Exchange Credit Scores
OLDWICK, NJ–(BUSINESS WIRE)–AM Best upgraded the financial strength rating from B++ (Good) to A- (Excellent) and the issuer’s long-term credit rating to “a-” (Excellent) from “bbb+” (Good) from the Texas Hospital Insurance Exchange (THIE) (Austin, TX). The outlook for these Credit Ratings (ratings) is stable.
The ratings reflect THIE’s balance sheet strength, which AM Best assesses as strong, as well as its strong operating performance, limited business profile and appropriate enterprise risk management (ERM).
The upgrades reflect an improved balance sheet strength rating at the high end of the strong category. THIE maintains the highest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). The company has seen solid surplus growth over the past five-year period, despite continued cash distributions to policyholders. Through the nine months of 2021, these trends have persisted. The underwriting leverage metrics are very low and compare favorably to the commercial damage composite average. The development of claims reserves continues to be redundant, although less extensively in recent years. Compensating factors include limited scale and financial flexibility as a stand-alone reciprocal. In addition, most of the surplus is made up of balances in subscribers’ savings accounts, which are eligible to be returned to withdrawn members beginning five years after leaving the reciprocal exchange.
THIE’s operational performance has been strong and is the main driver of surplus growth. The limited business profile assessment primarily reflects product and geographic concentration risks due to THIE’s focus on workers’ compensation, professional liability and related coverages for small rural hospitals in the Texas. An appropriate ERM program is in place, with well-identified key risks and corresponding mitigation strategies.
A negative rating action could result from an adverse trend in operating performance due to an increase in claims frequency, severity or adverse claims development.
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