AM Best has assigned a Financial Strength Rating of B (Fair) and a Long-Term Issuer Credit Rating of “bb+” (Fair) to MG Insurance Company (MGIC) (Scottsdale, AZ). The outlook assigned to these Credit Ratings (ratings) is stable.

The ratings reflect MGIC’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).

MGIC’s risk-adjusted capitalization, as measured by Best's Capital Adequacy Ratio (BCAR), is at the strongest level, which reflects the company's ability to support its insurance and investment risks. MGIC also currently holds a very liquid and conservative investment portfolio that is solely held in cash and a short-term investment allocation. The organization’s capital is anticipated to largely grow organically as the company grows its operations in the stop-loss and Medicare Part D segments; however, AM Best notes that the company's absolute capital is considered modest. While capital levels are adequate for MGIC’s present risks, the company’s financial flexibility is somewhat limited.

The organization's premium development is dependent on its ability to market its new core stop-loss and Medicare Part D offerings. Operational services are utilized from a third-party administrator, and expense controls are leveraged through its relationship with its parent, MedImpact Holdings, Inc. (MedImpact), and its affiliate, Verdegard. The operating performance of MGIC reflects its startup status, and AM Best expects that operating results could be challenged as it ramps up new sales.

MGIC is starting its operations with a limited product portfolio, targeting the stop-loss and Medicare Part D market segments, which are highly competitive. MGIC has developed a business plan that stages the rollout of its products systematically along with state approvals. AM Best believes that the organization will be initially concentrated by product offering and geographic footprint as it expands. The organization's distribution channels and partnerships are evolving, and MGIC is expected to bring future growth to the organization through strengthening distribution with its partners and brokers.

MGIC leverages a multilayered ERM program managed by its parent, MedImpact, and is subject to various provisions of its policies and procedures, such as ethics and business conduct, as well as its corporate compliance programs. MGIC also focuses on traditional insurance risk management strategies, which are appropriate given the current size and scale of its operations. These include compliance, information technology, cyber risk and business continuity procedures.

MGIC is viewed as strategically important to and integrated with its parent company, MedImpact, and plans to bring innovative products and service solutions to the stop-loss and Medicare Part D markets. The organization's business plan includes the implicit capital support of MedImpact, and the implicit resources, support and commitment of the parent as needed for meeting future sales targets and for support in maintaining a minimum internally set risk-adjusted capital level. However, AM Best believes that the financial leverage and level of goodwill and intangibles to capital at the parent limit its future financial flexibility, and therefore, its ability to support substantive growth of MGIC’s products in the near term.

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