A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) and issuer credit ratings (ICR) of “a-” of Madison National Life Insurance Company, Inc. (MNL) (Madison, WI), Standard Security Life Insurance Company of New York (SSL) (New York, NY) and Independence American Insurance Company (Independence American) (New Castle, DE). A.M. Best also has affirmed the ICR of “bbb-” of the parent company, Independence Holding Company (Independence Holding) (Stamford, CT) [NYSE: IHC]. The outlook for all ratings is negative.

Independence Holding’s primary insurance product, medical stop-loss, continues to be sold in a “soft market.” The organization has become more selective with its underwriting of medical stop-loss, as well as individual and small group major medical, in order to improve loss ratios. These efforts have led to improved operating earnings in 2009; however, premiums for these product lines have decreased in the same period. To offset the decrease in premium income, the organization has been expanding its fully insured products, including individual and small group major medical, dental and vision primarily through captive distribution. A.M. Best notes that these markets continue to be very competitive.

During 2008 and early 2009, Independence Holding experienced noticeable deterioration in its investment portfolio performance, primarily due to the widening of credit spreads.

However, the repositioning of the company’s investment portfolio, combined with the tightening of spreads, has helped reduce its unrealized loss position in recent quarters. While Independence Holding’s consolidated risk-adjusted capital is currently adequate and its portfolio as a whole has improved, A.M. Best remains concerned due to the global financial crisis; thus, any negative rating migration of the investment portfolio or additional capital losses may put a strain on its capital. A.M. Best will continue to monitor the group’s performance and its investment portfolio as Independence Holding looks to continue to improve its overall capital strength, particularly for MNL.

For Best’s Credit Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.

The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.

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