OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has affirmed the financial strength rating of A (Excellent) and the issuer credit rating of “a” of SilverScript Insurance Company (SilverScript) (Nashville, TN). The outlook for both ratings is stable.
The ratings are based on SilverScript’s more-than-adequate level of risk-adjusted capitalization. This strength is driven by its favorable annual operating earnings trend and the lack of dividends paid out of surplus, which also has allowed the company to strengthen its capital position. Additionally, the company’s long-term underwriting and net gain trends are partially attributed to the consolidation of two other prescription drug plans into SilverScript, Accendo Insurance Company in 2012 and Pennsylvania Life Insurance Company in 2013, as each company novated its contract with the Centers for Medicare & Medicaid Services (CMS). This consolidation of plans, in addition to growth in the more profitable subsidy eligible membership, has garnered SilverScript’s scale and stronger operating results. Furthermore, SilverScript is strategically important to its ultimate parent’s, CVS Health Corporation (CVS Health) [NYSE:CVS], strategy to compete in the federal government’s Medicare prescription drug program that services the senior population.
Offsetting factors include SilverScript’s concentration of a single line of business. SilverScript solely offers Medicare Part D (PDP) products to individuals and employer groups; therefore, the company’s portfolio has very little product diversification. The lack of product diversity subjects the company to increased regulatory risk and also may affect gains; however, the company continues to report favorable earnings. The PDP program results in large receivables that are settled by CMS in the following year. A.M. Best recognizes the lower risk of U.S. government program payment default; however, the accumulation of a large program receivable and the timing of settlement payments may present liquidity concerns should the reconciliation process cause delays in receipt of payments. Some of the liquidity concerns are mitigated through its ceded reinsurance agreements and the support from its ultimate parent, CVS Health, should it be necessary.
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