OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has revised the outlooks to stable from negative and affirmed the Financial Strength Rating (FSR) of A- (Excellent) and the Long-Term Issuer Credit Ratings (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, AM Best has revised the outlook to stable from negative and affirmed the Long-Term Issue Credit Rating of “bbb+” on the $250 million 3.79% senior unsecured notes due 2025 issued by BCBSM. Both companies are domiciled in Eagan, MN.
Concurrently, AM Best has revised the outlooks to stable from positive and affirmed the FSR of B++ (Good) and the Long-Term ICR of “bbb+” of MII Life Insurance, Incorporated (MII Life) (St. Paul, MN).
The Credit Ratings (ratings) of BCBSM reflect the company’s balance sheet strength, which AM Best categorizes as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).
The revised outlooks for BCBSM reflect continued turnaround in operating performance through 2018, driven by Medicaid and commercial businesses. Prospective operating results are expected to benefit from medical cost containment achieved through value-based provider partnerships and further operating efficiencies gained through recent investment in technology. The ratings are supported by strong risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). BCBSM’s financial flexibility is enhanced through access to Federal Home Loan Bank borrowings and lines of credit with several banks. In addition, BCBSM continues to maintain a dominant market position in Minnesota and has a large membership base offering a diverse product portfolio.
Partially offsetting rating factors for BCBSM include recent weakening of risk-adjusted capitalization and history of earnings volatility. BCBSM’s capital position has been pressured by dividend payments to the parent holding company, Aware Integrated, Inc., as well as accelerated investments in the group’s operational capabilities. BCBSM’s earnings have been affected negatively by elevated operating expenses, primarily due to the temporary simultaneous operation of two operating platforms during the technology transition, as well as a highly competitive environment and the ability to obtain sufficient rates to maintain profitability in the Minnesota Medicaid program.
The ratings of MII Life reflect the company’s balance sheet strength, which AM Best categorizes as adequate, as well as its adequate operating performance, limited business profile and appropriate ERM.
MII Life’s ratings also consider the implicit and explicit support received from its ultimate parent, Aware Integrated, Inc. MII Life is strategically importance to the organization, as it provides opportunities for revenues and earnings diversification through offering Health Savings Accounts services and a Medicare Prescription Drug, Part D product. The rating outlook revisions to stable reflect material deterioration in the company’s risk-adjusted capitalization in 2018, although AM Best notes improvement in early 2019.
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