AM Best

AM Best Affirms Credit Ratings of Health Care Service Corporation and Its Subsidiaries


Jennifer Asamoah
Financial Analyst
+1 908 439 2200, ext. 5203

Sally Rosen
Senior Director
+1 908 439 2200, ext. 5280
Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159

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


OLDWICK - JUNE 04, 2020 01:08 PM (EDT)
AM Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a+” 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. The outlook of these Credit Ratings (ratings) is positive. See below for a detailed list of the subsidiaries.

The ratings of HCSC reflect its balance sheet strength, which AM Best categorizes as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management. The positive outlooks reflects HCSC’s favorable operating performance trends and ability to execute on the strategic plan under its new management team.

HCSC maintains the strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). The company has reported strong capital & surplus growth in the past few years, driven by improved earnings, as well as the positive impact from the elimination of the corporate alternative minimum tax (AMT) at the end of 2017. HCSC has good financial flexibility. The company recently issued $2 billion of privately placed notes and has a five-year $400 million senior unsecured revolving credit facility with a consortium of banks. Also, through the Federal Home Loan Bank of Chicago (FHLB), the company has additional borrowing capacity of over $2.0 billion. HCSC’s debt-to-capital ratio is approximately 10% and financial leverage is considered to be low. Furthermore, HCSC’s earnings before interest and taxes (EBIT) interest coverage ratio is expected to remain strong at well over 10x.

HCSC has reported a trend of robust earnings in 2017 and 2018 following initiatives taken to improve its individual exchange business after losses in 2014 through 2015. Underwriting results moderated in 2019 as the company priced closer to trend and undertook initiatives to invest in the business and grow membership. As part of the elimination of the AMT in 2017, the company reported a tax credit in 2018 and 2019 that boosted earnings. While earnings and return on revenue (ROR) declined in 2019, ROR was above 5%, which is considered good. AM Best expects HCSC’s strong earnings and ROR trend to continue in the near to medium term.

Offsetting rating factors include continued losses in its Medicaid Managed Care (Medicaid) lines of business. HCSC continues to invest in the capabilities needed to manage, support and provide appropriate cost-efficient care to the higher risk population. While the Medicaid business is still reporting sizeable losses, the results have improved as membership grows and the line of business achieves scale. Furthermore, AM Best remains concerned regarding the departure of several members of senior management and the impact on the organization’s strategic direction. In July 2019, both the CEO and Chief Financial Officer left HCSC unexpectedly. This was followed by the departure of other senior management team members. The President was appointed as CEO in May 2020 and the strategic plan under the new leadership is in the early stages of being executed.

The FSR of A (Excellent) and the Long-Term ICRs of “a+” have been affirmed with positive outlooks for Health Care Service Corporation, A Mutual Legal Reserve Company and the following subsidiaries:

  • Dearborn Life Insurance Company

  • Dearborn National Life Insurance Company of New York

  • GHS Health Maintenance Organization

  • GHS Insurance Company

  • HCSC Insurance Services Company

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 Guide to 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 credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.

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