OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has downgraded the Financial Strength Rating to A- (Excellent) from A (Excellent) and the Long-Term Issuer Credit Rating to “a-” from “a” of Blue Cross and Blue Shield of Nebraska (BCBSNE) (Omaha, NE). The outlook of these Credit Ratings (ratings) is stable.
The rating downgrades reflect the significant reduction in risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), over the past several years driven by sizeable operating losses combined with write-downs on the company’s private equity holdings. A.M. Best is concerned that any further losses may place additional pressure on the current capitalization level. BCBSNE gained a significant share of the individual market on exchange business in 2016. This segment was impacted by numerous factors, which included greater utilization and a larger number of high-risk individuals leading to sizeable underwriting losses. The company has since exited the exchange marketplace and implemented several strategic initiatives to help improve its overall performance. While A.M. Best expects earnings to improve in 2017, the level of projected net income is not sufficient to restore risk-adjusted capital to historic levels. Furthermore, BCBSNE maintains geographic and business concentration risk operating as a mono-line health insurer, with a high concentration of premium in Nebraska. This concentration limits the company’s opportunities for growth and exposes the organization’s results to the potential impact of regulatory, legislative and economic changes in its narrow market.
Partially offsetting these negative rating factors are the company’s leading market position and brand strength, as well as enrollment and premium growth. The company offers a comprehensive portfolio of core health and complementary products, and operates in numerous market segments. In addition, BCBSNE has continued to maintain solid levels of investment income that partially offset the underwriting losses.
This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings.
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