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Best’s News & Research Service - November 12, 2021 12:01 PM (EST)

AM Best Revises Outlooks to Stable for Health Care Service Corporation and Its Subsidiaries

  • November 12, 2021 12:01 PM (EST)
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Oldwick //BestWire// - AM Best has revised the outlooks to stable from positive and affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a+” (Excellent) 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. See below for a detailed list of the subsidiaries.

The Credit Ratings (ratings) reflect HCSC’s balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

The revised outlooks to stable reflect a tempering of earnings following a period of strong earnings with underwriting income exceeding $2 billion two of the past three years and net income exceeding $2 billion each of the past three years. AM Best notes that earnings the past few years were impacted by several one-time events, which include the receipt of the risk-corridors payment from the federal government and widespread deferral of care due to the COVID-19 pandemic in 2020, as well as the refund recovery of accumulated Alternative Minimum Tax credits that resulted from the Tax Cuts and Job Act of 2017. Excluding the one-time events, earnings are expected to moderate further in the near term due to the impact of COVID-19-related claims, an increase in utilization to more normal levels and less COVID-19-related deferral of care, as well as initiatives HCSC is undertaking to invest in its business. However, AM Best notes that underwriting and net income are expected to remain profitable.

The rating affirmations of HCSC and its subsidiaries reflect the strongest balance sheet strength assessment, which is supported by the strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), in support of its business and investment risks. In addition, absolute and risk-adjusted capital experienced growth through 2021 driven by net gains. Furthermore, HCSC has strong financial flexibility with a $1 billion line of credit with a consortium of banks and access to $1.75 billion of borrowing capacity through the Federal Home Loan Bank (FHLB) of Chicago. The organization has low financial leverage, below 10%, and strong interest coverage.

The group has a well-established market presence in its respective markets and leading overall market shares in each of the five states in which it operates. Furthermore, HCSC has reported consistent enrollment gains the past few years, driven by the group and government sector of business. Moreover, the organization continues to benefit from the growth of Blue-branded and non-branded ancillary products offered through Dearborn National Life Insurance Company, which provides the organization with Group Life, Dental, Disability, Critical Illness and Vision products. HCSC also markets other Blue-branded ancillary products, such as pharmacy, advanced payment review and health advocacy solutions.

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

  • Dearborn National Life Insurance Company

  • Dearborn National Life Insurance Company of New York

  • GHS Health Maintenance Organization, Inc.

  • 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 use of Best’s Credit Ratings, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

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 London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.

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