OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has removed from under review with negative implications and downgraded the Financial Strength Rating to C+ (Marginal) from C++ (Marginal) and the Long-Term Issuer Credit Rating to “b-” from “b+” of Health Insurance Plan of Greater New York, HIP Insurance Company of New York, Group Health Incorporated and ConnectiCare, Inc. (Farmington, CT) (collectively referred to as EmblemHealth). All companies are subsidiaries of EmblemHealth, Inc. and domiciled in New York, NY, unless otherwise specified. The outlook assigned to these Credit Ratings (ratings) is negative.
The ratings were placed under review with negative implications on Oct. 13, 2017, following the release of the updated Best’s Credit Rating Methodology (BCRM). The current rating actions follow the completion of A.M. Best’s analysis of EmblemHealth under the updated BCRM.
The ratings reflect EmblemHealth’s balance sheet strength, which A.M. Best categorizes as very weak, as well as its marginal operating performance, neutral business profile and marginal enterprise risk management (ERM). The negative outlook reflects A.M. Best’s concerns that the balance sheet strength will continue to be very weak due to uncertainty about management’s ability to improve capitalization while achieving business growth over the medium term.
EmblemHealth’s combined capital and surplus has been negatively impacted by continued underwriting losses and restructuring costs related to its business and technology transformation. The level of capital and surplus of Health Insurance Plan of Greater New York fell below its statutory requirement as of Dec. 31, 2016, and as a result, the company filed a plan of surplus restoration with the New York State Department of Financial Services. The plan calls for meeting the state’s statutory reserve requirement over a three-year period and to comply with a reduced statutory reserve requirement. The capital and surplus of Health Insurance Plan of Greater New York exceeded the reduced requirement at year-end 2017. All other EmblemHealth companies exceed their statutory reserve requirements. Additionally, EmblemHealth has limited access to capital and modest financial flexibility given its capital levels at its other insurance entities.
Although A.M. Best expects EmblemHealth’s operating performance to improve, results are likely to remain insufficient to materially improve risk-adjusted capital over the near to medium term. However, the company’s solid market share in the Greater New York area, including the contract for the City of New York account, is supportive of the neutral business profile assessment. Furthermore, EmblemHealth’s affiliation with AdvantageCare Physicians, a physician practice with multiple locations in New York City, provides a competitive advantage in delivering quality primary care-focused services to customers in all lines of business.
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