Press Release - MAY 30, 2019

AM Best Revises Issuer Credit Outlook to Negative for Blue Cross and Blue Shield of Vermont and Its Subsidiary

 David Mitchell
Senior Financial Analyst
+1 908 439 2200, 5556

Bridget Maehr
Associate Director
+1 908 439 2200, ext. 5321

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159

Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644


OLDWICK - MAY 30, 2019
AM Best has revised the outlook to negative from stable for the Long-Term Issuer Credit Rating (Long-Term ICR) and affirmed the Financial Strength Rating (FSR) of B++ (Good) and the Long-Term ICR of “bbb+” of Blue Cross and Blue Shield of Vermont and its wholly owned subsidiary, The Vermont Health Plan, LLC. The outlook of the FSR remains stable. These companies are collectively known as BCBSVT Group. Both companies are domiciled in Berlin, VT.

The Credit Ratings (ratings) reflect BCBSVT Group’s balance sheet strength, which AM Best categorizes as strong, as well as its marginal operating performance, neutral business profile and appropriate enterprise risk management.

The revision of the Long-Term ICR outlook to negative from stable reflects AM Best’s expectation that BCBSVT Group’s risk-adjusted capital will remain under pressure in the medium to long term. The company’s risk-adjusted capitalization deteriorated sequentially over the past four years, as evidenced by the declining NAIC RBC score over company action level.

From an operating performance perspective, the company has exhibited earnings fluctuation as it has reported sharp losses in underwriting results, where in some cases the organization’s investment income did not provide a sufficient hedge to stabilize pre-tax operating performance. The unfavorable underwriting results over the past four years have been caused primarily by BCBSVT being unable to receive adequate rate increases approved through the state’s rate review process. Realized capital gains were positive over the past five years, and over the same period, accumulated unrealized gains were largely positive. However, balance sheet contraction occurred as a result of unfavorable non-operating adjustments to capital and surplus. The organization’s financial flexibility remains good. Its improved cash position is a result of the availability of a renewable banking facility that offers reasonable rates. Overall liquidity scores over the past five years were strong, along with reduced but still strong working capital ratios over the period.

With the highest market share in Vermont, BCBSVT Group is transitioning toward becoming mainly a health and wellness organization, which is expected to enhance its well-established, high-touch service credentials. New product designs are in line with the organization’s long-term imperative, which include market sustainability of individual and small group lines of business, as well as higher penetration in the Medicare segment.

This press release relates to Credit Ratings that have been published on AM 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 AM 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. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global rating agency and information provider with a unique focus on the insurance industry.

Related Companies

For information about each company, including the Best's Credit Reports, group members (where applicable) and news stories, click on the company name. An additional purchase may be required.