Best’s News & Research Service - September 22, 2016 11:37 AM (EDT)
A.M. Best Revises Outlooks to Negative for Blue Cross Blue Shield of Michigan Mutual Ins Co. and Blue Care Network of Michigan
- September 22, 2016 11:37 AM (EDT)
Oldwick //BestWire// - A.M. Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating (FSR) of A- (Excellent) and the Long-Term Issuer Credit Ratings (ICR) of “a-” of Blue Cross Blue Shield of Michigan Mutual Insurance Company (BCBSM) (Detroit, MI) and its subsidiary, Blue Care Network of Michigan (Southfield, MI).
The revised outlooks reflect A.M. Best’s concerns surrounding the recent decline in operating results in 2015. The 2015 losses were largely driven by one-time expenses related to legal settlement fees and continued unfavorable underwriting results of the Medigap line of business. However, A.M. Best recognizes that BCBSM has implemented rate increases on its Medigap products for 2017, now permitted by the state for the first time in five years, which are expected to have a favorable impact on earnings. Furthermore, the group’s risk-adjusted capital has deteriorated the last couple of years and declined in 2015, driven by the losses and investments in strategic acquisitions, to the lowest level over the past five years. A.M. Best is concerned that any further losses may place additional pressure on the current level of capitalization.
The Credit Ratings (ratings) of BCBSM and its subsidiary reflect its leading market share position in the Michigan health care market. The organization possesses strong brand recognition and maintains good strategic relationships with diverse group of providers. BCBSM and its subsidiary have continued to demonstrate enrollment and premium growth across the majority of the lines of business. BCBSM’s vast array of products and services enables it to compete effectively in the health insurance market in the state. Furthermore, BCBSM has continued to maintain solid levels of investment income and has exhibited some improvement in earnings trends through the first half of 2016.
The affirmation of the ratings of Blue Care Network of Michigan reflects its more-than-adequate risk-adjusted capitalization, improvement in operating results through the first half of 2016 and its role as a strategic operating health maintenance organization within the organization. The ratings also recognize the inherent benefits this entity derives as a subsidiary of BCBSM.
This press release relates to Credit Ratings that have been published on A.M. 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 A.M. 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.
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