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TMCNet:  A.M. Best Benchmarking Analysis Shows U.S. Health Insurance Market Remains Strong

[November 13, 2017]

A.M. Best Benchmarking Analysis Shows U.S. Health Insurance Market Remains Strong

An A.M. Best analysis of the U.S. health insurance industry under the rating agency's revised Best's Credit Rating Methodology (BCRM) and its new building block approach revealed that 35% of the rated population had the strongest category of balance sheet strength.

The Best's Special Report, titled "U.S. Health Insurers - Building Block Approach: Market Remains Strong Despite Challenging Regulatory Environment," determined that when viewed under the new building block approach, rated U.S. health insurance companies generally have strong balance sheets, adequate operating performance, neutral to limited business profiles and appropriate enterprise risk management (ERM).

"This generalized assessment of rating factors appears reasonable and in line with expectations based on the operating philosophies of the U.S. health insurance companies," said Sally Rosen, senior director.

Benchmarking statistics were generated after testing the rated health insurer population, the overall results of which are detailed in this report. Fewer than 5% of A.M. Best's ratings were placed under review following the implementation of the new BCRM on Oct. 13, 2017.

The benchmarking report indicated that the majority of rated health carriers have strong capitalization, as almost 60% of the rated entities had balance sheet strength considered Very Strong or Stronget and an additional 15% were assessed at Strong. The primary quantitative tool used to evaluate balance sheet strength is Best's Capital Adequacy Ratio (BCAR), which helps determine whether a company's capitalization is appropriate; however, A.M. Best takes all of the balance sheet components into consideration, as BCAR itself is not the sole determinant of the balance sheet strength assessment.

Along with balance sheet strength, the key pillars A.M. Best uses in its credit analysis are operating performance, business profile and ERM. The operating performance of more than 50% of the U.S. health insurers would be assessed at adequate. Key characteristics of these companies include neutral operating trends, as well as historical and prospective operating performance, which also are expected to remain neutral. Overall, the business profile assessments of more than 85% of U.S. health insurers were neutral or limited, while approximately 88% were considered to have an appropriate ERM framework.

Over the past two months, similar studies were released for U.S. life/annuity insurers, U.S. property/casualty, and U.S. mutual insurers, as well as European insurers and the global reinsurance companies. This report follows many months of testing and benchmarking, commentary periods on the methodology, and the formal rating committee process.

To access a copy of this special report, please visit .

A.M. Best is the world's oldest and most authoritative insurance rating and information source. For more information, visit

Copyright © 2017 by A.M. Best Rating Services, Inc. and/or its subsidiaries. ALL RIGHTS RESERVED.

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