|[February 16, 2017]
A.M. Best Downgrades Credit Ratings of Blue Cross and Blue Shield of Nebraska
A.M. Best has downgraded the Financial Strength Rating to A-
(Excellent) from A (Excellent) and the Long-Term Issuer Credit Rating to
"a-" from "a" of Blue Cross and Blue Shield of Nebraska (BCBSNE)
(Omaha, NE). The outlook of these Credit Ratings (ratings) is stable.
The rating downgrades reflect the significant reduction in risk-adjusted
capitalization, as measured by Best's Capital Adequacy Ratio (BCAR),
over the past several years driven by sizeable operating losses combined
with write-downs on the company's private equity holdings. A.M. Best is
concerned that any further losses may place additional pressure on the
current capitalization level. BCBSNE gained a significant share of the
individual market on exchange business in 2016. This segment was
impacted by numerous factors, which included greater utilization and a
larger number of high-risk individuals leading to sizeable underwriting
losses. The company has since exited the exchange marketplace and
implemented several strategic initiatives to help improve its overall
performance. While A.M. Best expects earnings to improve in 2017, the
level of projected net income is not sufficient to restore risk-adjusted
capital to historic levels. Furthermore, BCBSNE maintains geographic and
business concentration risk operating as a mono-line health insurer,
with a high concentration of preium in Nebraska. This concentration
limits the company's opportunities for growth and exposes the
organization's results to the potential impact of regulatory,
legislative and economic changes in its narrow market.
Partially offsetting these negative rating factors are the company's
leading market position and brand strength, as well as enrollment and
premium growth. The company offers a comprehensive portfolio of core
health and complementary products, and operates in numerous market
segments. In addition, BCBSNE has continued to maintain solid levels of
investment income that partially offset the underwriting losses.
This press release relates to Credit Ratings that have been published
on A.M. Best's website. For all rating information relating to the
release and pertinent disclosures, including details of the office
responsible for issuing each of the individual ratings referenced in
this release, please see A.M. Best's Recent
Rating Activity web page. For additional information
regarding the use and limitations of Credit Rating opinions, please view Understanding
Best's Credit Ratings.
A.M. Best is the world's oldest and most authoritative insurance
rating and information source. For more information, visit www.ambest.com.
Copyright © 2017 by A.M. Best Rating Services, Inc. and/or its
subsidiaries. ALL RIGHTS RESERVED.
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