10 K Report Exposes Carrier Strategies

The SEC publishes 10K Filings which provides  useful information regarding company finances and strategies. Ever wonder who owns the MGU, and who owns the owner of the MGU, and who owns the owners of the owners of the MGU or insurance carrier, or which marketing firm (brokerage) is owned by any one of the above owners? A 10K filing provides the answers. Below is a portion of a recent filing:

OUTLOOK

 

For 2011, we will continue to emphasize:

Creating operating efficiencies as a result of merging four of our stop-loss subsidiaries and rebranded the enterprise as IHC Risk Solutions (“IHCRS”).  IHCRS has combined operations with two MGUs owned by IHC to form one functional unit.  This consolidation significantly enhances our operational efficiencies, allows us to be more focused on our underwriting results and combine the regional knowledge of our owned MGUs in order to deliver medical stop-loss on a direct basis.  

We believe that medical stop-loss business written in 2011 will be quite profitable due to: (i) the underwriting and sales discipline resulting from the consolidation of IHCRS; (ii) the 18.5% average rate increases achieved by IHCRS on renewal business through June, 2011; (iii) reduction in run-in out from poorly performing non-owned programs that we reinsured which have been cancelled; and (iv) a hardening of the market.  In addition we will retain more risk on our business as a result of our increased capital base, which will increase our net retained premiums and our future profits starting next year.

Continuing to improve the profitability of our Medical Stop-Loss business, while organically growing the block at IHCRS.

Continuing to seek additional opportunities to distribute medical stop-loss and fully insured health products on Independence American paper.

Rolling out various supplemental medical products in 2011 for which we believe there will be a developing market in future years.  Independence American has filed these products and they are now being distributed by Independent Producers of America, among others.

Continuing the improved profitability of our fully insured health business by monitoring compliance with the corrective actions taken in 2009 and 2010 on this line.  Although fully insured experienced a higher loss ratio due to one managing general underwriter experiencing extraordinarily high claims in this quarter, we do not currently believe that this represents a trend and do not expect this high level of claims to reoccur in the remainder of the year.

We will continue to focus on our strategic objectives, including expanding our distribution network.  However, the success of a portion of our fully insured health business may be affected by the passage of the Patient Protection and Affordable Care and Education Reconciliation Act of 2010 signed by President Obama in March 2010.  The National Association of Insurance Commissioners has now issued its proposed regulations.  The regulations proposed to-date (including those mandating minimum loss ratios) seem to have validated our strategy of pursuing niche lines of business across many states utilizing multiple carriers and we believe they will have minimal impact in the near future.  We have begun a comprehensive review of all the options for AMIC and we are continuing a thorough evaluation of our options for those health insurance products that may be affected.  Although the law will generally require insurers to operate with a lower expense structure for major medical plans in the small employer and individual markets, the law may make exceptions for carriers, such as ours, that have a minimal presence in any one state.  “Non-essential” lines of business are not impacted by health care reform.

Our results depend on the adequacy of our product pricing, our underwriting and the accuracy of our reserving methodology, returns on our invested assets and our ability to manage expenses.  Therefore, factors affecting these items, including unemployment and global financial markets, may have a material adverse effect on our results of operations and financial condition

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