OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating (FSR) of A- (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “a-” of BCBSM, Inc., d/b/a Blue Cross Blue Shield of Minnesota (BCBSM) and its subsidiary, HMO Minnesota d/b/a Blue Plus (Blue Plus). In addition, A.M. Best has affirmed the Long-Term Issue Credit Rating of “bbb+” on the $250 million 3.79% senior unsecured notes due 2025 issued by BCBSM. The outlook of these Credit Ratings (ratings) is negative. Both companies are domiciled in Eagan, MN.
Concurrently, A.M. Best has revised the outlooks to positive from stable and affirmed the FSR of B++ (Good) and Long-Term ICR of “bbb+” of MII Life Insurance, Incorporated (MII Life) (St. Paul, MN). The ratings reflect BCBSM’s balance sheet strength, which A.M. Best categorizes as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
The negative outlook for BCBSM and Blue Plus reflects the recent history of underwriting losses and potential that continued investments in the business may pressure earnings in the near-term. Furthermore, the dividend in 2017 from the BCBSM to its parent, Aware Integrated, Inc. exceeded earnings and A.M. Best has concerns that should this continue, risk-adjusted capitalization may weaken.
BCBSM maintains a favorable risk-adjusted capital position, which supports its business and investment risks. However, both earnings and capital growth have been challenged over the past several years. Both BCBSM and Blue Plus have reduced their underwriting losses significantly in 2017, which is attributed partially to pricing actions taken to ensure rate adequacy, as well as exiting from highly volatile individual on-exchange business. In addition, BCBSM continues to maintain a dominant market position in Minnesota and enjoys strong brand recognition, strategic relationships with a diverse group of provider networks and a balanced product portfolio. However, A.M. Best notes that BCBSM operates in a highly competitive environment in which pricing pressures underwriting earnings for all carriers. Furthermore, BCBSM has a high exposure to Minnesota’s Medicaid program and depends on its ability to obtain sufficient rates to maintain profitability.
MII Life’s rating affirmations were driven by its very strong balance sheet and adequate operating performance. The positive outlook reflects the growing importance of MII Life for the parent organization as a source of earnings and business diversification. The company has an established presence in administering health spending and health reimbursement accounts, as well as other custodial accounts and services. MII Life has operated in its core product segments for over 30 years and ranks among the top leading administrators and the top voluntary employee beneficiary association administrators in the nation. The company reported favorable operating performance through early 2018. Additionally, the company continues to benefit from operational and financial support from its ultimate parent, Aware Integrated, Inc, and its affiliated company, BCBSM. MII Life has a reinsurance agreement with BCBSM.
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