A.M. Best Affirms Ratings of Highmark Inc. and Its Subsidiaries

OLDWICK, N.J.--()--A.M. Best has affirmed the financial strength ratings (FSR) of A- (Excellent) and the issuer credit ratings (ICR) of “a-” of Highmark Inc. (Highmark), Keystone Health Plan West, Inc., HM Health Insurance Company and Highmark West Virginia Inc. (Parkersburg, WV). Concurrently, A.M. Best has affirmed the debt ratings of “bbb+” of Highmark.

Additionally, A.M. Best has affirmed the FSRs of A- (Excellent) and the ICRs of “a-” of Highmark’s life/health and property/casualty subsidiaries, which include HM Life Insurance Company (HM Life), HM Life Insurance Company of New York (HM Life New York) (New York, NY), Highmark Casualty Insurance Company (Highmark Casualty) and HM Casualty Insurance Company (HM Casualty), as well as Highmark’s dental subsidiaries, which operate under the United Concordia brand name. The outlook for all ratings is stable. The above companies are domiciled in Pittsburgh, PA, unless otherwise specified. (See below for a detailed listing of the dental companies and ratings.)

The ratings of Highmark reflect its favorable operating results, strong market share and brand recognition and good risk-adjusted capitalization. Highmark’s overall health business earnings are the main driver of underwriting performance, which are expected to remain its core strength for the foreseeable future. Highmark maintains a strong presence in its core markets of Pennsylvania, West Virginia and Delaware, and its brand is widely recognized across its operating regions. Capitalization for the group continues to strengthen due to positive net income and retained earnings.

Offsetting rating factors include competitive and economic pressures, operational and balance sheet risk associated with the organization’s integrated delivery system strategy and near-term margin compression. Highmark competes directly with another Blue Cross Blue Shield plan in central Pennsylvania and other national and local carriers throughout the state. Furthermore, the overall cost for the organization’s integrated delivery system strategy, which includes the Allegheny Health Network, a sister company of Highmark, could place pressure on Highmark, should additional financial support be needed to foster the strategy. Additionally, A.M. Best expects pricing challenges and margin compression to cause operating results to moderate in the near term.

The affirmation of the ratings of HM Life and HM Life New York recognizes their market share, stable operating performance and cash flows. The Highmark Life companies add earnings diversity to the organization, as well as enable the organization to offer a comprehensive portfolio of products. Although it presents some concentration risks, HM Life’s earnings are primarily driven by its medical stop loss business that is predominantly offered along with Highmark and other Blue Cross Blue Shield plans’ health products and services.

The ratings for Highmark Casualty and HM Casualty acknowledge their combined strong operating performance, adequate capitalization and solid business strategy that focuses on aggressive claims management and prudent reserving practices. The ratings also recognize the inherent benefits these companies derive as operating subsidiaries of their parent, Highmark.

The affirmation of the ratings of Highmark’s United Concordia subsidiaries reflects their favorable operating results and healthy levels of risk-adjusted capital. A.M. Best notes that premiums have recently declined due to a loss of a large dental program contract. However, United Concordia’s new business growth strategies have contributed positively to the organization.

Factors that may lead to positive rating actions include meaningful premium growth, an enhanced risk-adjusted capitalization and an improvement in operating margins. Factors that may lead to negative rating actions include deterioration in operating performance, a substantial decline in risk-adjusted capitalization or failure to execute its integrated delivery system strategy.

The FSR of A- (Excellent) and ICRs of “a-” have been affirmed for the following dental subsidiaries of Highmark, Inc.:

  • United Concordia Companies, Inc.
  • United Concordia Life and Health Insurance Company
  • United Concordia Insurance Company
  • United Concordia Insurance Company of New York
  • United Concordia Dental Plans of California, Inc.
  • United Concordia Dental Plans of Pennsylvania, Inc.
  • United Concordia Dental Plans, Inc.

The following debt ratings have been affirmed:

Highmark, Inc.—

-- “bbb+” on $350 million of 4.75% senior unsecured notes, due 2021

-- “bbb+” on $250 million of 6.125% senior unsecured notes, due 2041

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2014 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

Contacts

A.M. Best
Wayne Kaminski—L/H, 908-439-2200, ext. 5061
Senior Financial Analyst
wayne.kaminski@ambest.com
or
W. Dolson Smith, CFA—P/C, 908-439-2200, ext. 5379
Managing Senior Financial Analyst
w.dolson.smith@ambest.com
or
Rachelle Morrow, 908-439-2200, ext. 5378
Senior Manager, Public Relations
rachelle.morrow@ambest.com
or
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
james.peavy@ambest.com

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Contacts

A.M. Best
Wayne Kaminski—L/H, 908-439-2200, ext. 5061
Senior Financial Analyst
wayne.kaminski@ambest.com
or
W. Dolson Smith, CFA—P/C, 908-439-2200, ext. 5379
Managing Senior Financial Analyst
w.dolson.smith@ambest.com
or
Rachelle Morrow, 908-439-2200, ext. 5378
Senior Manager, Public Relations
rachelle.morrow@ambest.com
or
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
james.peavy@ambest.com