A.M. Best has upgraded the financial strength rating to B (Fair) from B- (Fair) and the issuer credit ratings to "bb" from "bb-" for the subsidiaries of USHEALTH Group, which include Freedom Life Insurance Company of America (Freedom Life) and National Foundation Life Insurance Company.
The outlook for all ratings has been revised to stable from positive.
The rating upgrades reflect USHEALTH Group's successful strategy to focus on products that are not subject to the Patient Protection and Affordable Care Act (PPACA)—the sales of which resulted in profitable growth, strong operating results and improved capitalisation.
In addition, the holding company repaid a portion of its debt and refinanced the remaining portion on more favorable terms during the Q1 2014.
USHEALTH Group remains focused on further enhancing its "exempt" and ancillary product offerings, expanding captive distribution into new geographies and maintaining long-term customer relationships as a means of increasing its scale and brand recognition in the marketplace.
Partially offsetting these positive rating factors is USHEALTH Group's need to service its remaining debt. A.M. Best claims that USHEALTH Group's capital and surplus growth will be impeded by debt service, as it relies partially on dividends from Freedom Life to repay its debt in the next few years.
In addition, USHEALTH Group remains challenged to maintain the growth of its supplemental medical products, especially as potential customers are eligible for subsidies on federal health insurance exchange products. Moreover, other small and mid-sized health carriers may enter the PPACA "exempt" product space, potentially pressuring USHEALTH Group's market position.
