Best’s News & Research Service - May 16, 2008 03:12 PM (EDT)
A.M. Best Revises Outlook for Canassurance Hospital Service Association and Canassurance Insurance Company to Positive
OLDWICK, N.J. //BestWire// - A.M. Best Co. has revised the outlook to positive from stable and affirmed the financial strength rating (FSR) of A- (Excellent) and issuer credit rating (ICR) of “a-”of Canassurance Hospital Service Association (d/b/a Quebec Blue Cross and Ontario Blue Cross) (Canassurance) and its subsidiary, Canassurance Insurance Company (both of Montreal, Quebec).
The ratings reflect Canassurance’s high level of capital & surplus, positive operating performance, diversified product line, strong brand recognition in its core markets and its more than adequate capital in support of its current business. Canassurance has consistently reported positive consolidated operating results and net income. Canassurance’s primary product lines are complementary health and dental and out-of-country medical products, but it also offers life, disability, travel and other complementary products. This diversified product line has allowed the organization to expand its market and grow its revenue base. Canassurance is licensed by the Canadian Association of Blue Cross plans to operate in Quebec and Ontario. The Blue Cross brand is widely known in Canada, and overall represents a significant portion of the supplemental health and dental insurance market.
Offsetting rating factors include the unknown performance of new product lines and the budgeted increases in expenses and lower operating margins for 2008. In 2007, Canassurance began to offer a new product that offers multiple insurance coverage within one product and has a convertible feature to a long-term care policy. The performance of this product will not be fully known in the near term because of the expectation that the policy will remain in force for a longer period than if the coverage options were purchased individually. Canassurance’s operating margin is expected to lower in the short to medium term due to increased expenses related to the development of information technology enhancements and higher commission expenses as more new business is being generated through brokers. Longer term, Canassurance’s management forecasts a higher operating margin, which is expected due to a decrease in administrative expenses per policy caused by technology enhancements and a larger mature insurance portfolio.
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