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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - MAY 27, 2004 12:00 AM (EDT)
A.M. Best Co. has assigned a financial strength rating of B++ (Very Good) to Pacific Hospital Association d/b/a PacificSource Health Plan (PacificSource) (Springfield, OR). The rating outlook is stable.
The rating reflects PacificSource's adequate level of risk-adjusted capitalization, favorable underwriting results and its diversified health care product portfolio. Offsetting factors include the heightened investment risk exposure with increased allocation to equity securities, the costs associated with infrastructure enhancements for its recently acquired third-party administrators and the competitive challenges it faces as it continues to expand into the Portland metro area.
Capital and surplus has been increasing each year through consistent positive underwriting results. PacificSource offers a diversified portfolio of health care products, which has provided a good range of flexibility and innovation in meeting customer needs. PacificSource has been diligent in requiring that each product offered is able to contribute positively to the company's overall financial results. This has been accomplished through its comprehensive network of providers and a demonstrated market reputation with good brand awareness.
PacificSource shifted its investment strategy to an increased level of equity investments, which resulted in a decline in its risk-adjusted capital ratio. A.M. Best is concerned with the potential conflicts of this strategy due to the high degree of liquidity needed to operate within the health care industry. With the recent addition of two third-party administrators, PacificSource also faces additional integration and infrastructure costs as it expands its presence and product offerings. As PacificSource expands into the Portland area it will face an increased level of competition from strong national and regional companies, which could have an impact on future profitability.
For current Best's Ratings, independent data and analysis on more than 1,050 health companies and more than 130 HMO industry composites, please visit Best's Health Center.
A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source.