OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has upgraded the Financial Strength Rating (FSR) to A+ (Superior) from A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICRs) to “aa-” (Superior) from “a+” (Excellent) of Health Care Service Corporation, a Mutual Legal Reserve Company (d/b/a Blue Cross Blue Shield of Illinois/Texas/New Mexico/Oklahoma/Montana) (HCSC) (headquartered in Chicago, IL) and its subsidiaries (see listing below). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect HCSC’s balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, favorable business profile and appropriate enterprise risk management.
The rating upgrades reflect HCSC’s well-established geographic diversity, as the company operates Blue Cross Blue Shield plans in five states. HCSC has benefited from its strong brand name recognition and a leading market share - as measured by membership - in the majority of its states. AM Best notes that HCSC has exhibited a relatively stable strategy and the ability to meet its forecasts over the past few years. The commercial group business remains an important market segment for HCSC, driving a large portion of premiums and enrollment volume. Its government business, including Medicare Advantage and related senior products, as well as Medicaid managed care offerings, have exhibited solid growth over the past year. Additionally, the government business comprises an increasing portion of the overall enrollment and premiums for the group.
Furthermore, the organization continues to benefit from the growth of Blue-branded and non-branded ancillary products offered through Dearborn National Life Insurance Company and Dearborn National Life Insurance Company of New York (Dearborn National), as well as its non-insurance service entities. The Dearborn National companies provide the HCSC organization a means to offer multiple products to its customers and provide both product and geographic diversification. Additionally, HCSC’s portfolio includes owned and affiliated companies that provide the organization with added diversified capabilities. Among HCSC’s non-insurance businesses is Trustmark Health Benefits, which offers additional flexible health benefit solutions, allowing HCSC to serve a broader customer base. Through its investment in Collective Health, HCSC delivers a digital platform to help employers navigate the evolving health care ecosystem. Through its affiliation with Prime Therapeutics LLC, HCSC is able to provide pharmacy benefit management services, as well as a comprehensive suite of solutions for complex and chronic conditions to drive down the cost of care.
The ratings are supported further by HCSC’s risk-adjusted capitalization, which continues to be at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). Risk-adjusted capitalization has been enhanced by its solid level of operating performance, which more than offset unrealized capital losses at year-end 2022 and has supported capital growth further through the first half of 2023. AM Best expects capital growth will continue to outpace the premium expansion, resulting in further strengthening of HCSC’s risk-adjusted capitalization. HCSC has financial flexibility through access to Federal Home Loan Bank (FHLB) of Chicago advances, bank lines of credit and its available cash position. Additionally, HCSC has ample contingent liquidity as it has a five-year, $1.0 billion senior unsecured revolving credit facility with a consortium of banks. Furthermore, its borrowing capacity under the FHLB remains over $1.7 billion and there were no borrowings outstanding through the first half of 2023. AM Best notes that HCSC’s financial leverage remains relatively low at 7.9% and within target levels at year-end 2022. In addition, HCSC’s earnings before interest and taxes (EBIT) interest coverage ratio is expected to remain strong as well, at well over 20 times. Further, HCSC has reported strong operating cash flow through 2023.
HCSC has reported volatile, but consistently solid underwriting and net income over the past five years, with net income exceeding $1 billion in each of the past five years and has produced favorable results across its diverse set of business lines and in its various core markets through the first half of 2023. Furthermore, HCSC has reported consistent enrollment gains in both its group and individual markets and in its government sector of business. In addition, HCSC has consisted reported premium revenue growth over the past five years and has been especially strong through the first half of 2023. Five-year compound annual growth rate of net premium written remains strong at almost 8% through 2022. HCSC’s overall investment portfolio has generated moderate levels of realized investment losses in recent periods and through the first half of 2023.
AM Best has upgraded the FSR to A+ (Superior) from A (Excellent) and the Long-Term ICRs to “aa-” (Superior) from “a+” (Excellent) with stable outlooks for Health Care Service Corporation, a Mutual Legal Reserve Company, and its following subsidiaries:
- Dearborn Life Insurance Company
- Dearborn National Life Insurance Company of New York
- GHS Health Maintenance Organization, Inc.
- GHS Insurance Company
- HCSC Insurance Services Company
- Health Care Service Corporation-Texas HMO Line of Business
- Health Care Service Corporation-Illinois HMO Line of Business
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