AM Best Upgrades Issuer Credit Ratings of Highmark Inc. and Its Subsidiaries
Monday, September 20, 2021
AM Best Upgrades Issuer Credit Ratings of Highmark Inc. and Its Subsidiaries
Oldwick, N.J. (September 20, 2021) — AM Best has upgraded the Long-Term Issuer Credit Ratings (Long-Term ICR) to “a+” (Excellent) from “a” (Excellent) and affirmed the Financial Strength Rating (FSR) of A (Excellent) of Highmark Inc. (Camp Hill, PA) and its life/health subsidiaries, collectively known as Highmark Inc. Group. Concurrently, AM Best has upgraded the Long-Term ICRs to “a+” (Excellent) from “a” (Excellent) and affirmed the FSR of A (Excellent) of Highmark Inc.’s dental subsidiaries, which operate under the United Concordia brand name. AM Best also has upgraded the Long-Term ICRs to “a+” (Excellent) from “a” (Excellent) and affirmed the FSR of A (Excellent) of Highmark Casualty Insurance Company (Highmark Casualty) (Pittsburgh, PA), a member of HM Insurance Group (HMIG). Lastly, AM Best has upgraded the Long-Term Issue Credit Rating (Long-Term IR) to “a” (Excellent) from “a-” (Excellent) on Highmark Inc.’s senior unsecured note. The outlook of these Credit Ratings (ratings) is stable. (See below for a detailed listing of the companies and the Long-Term IR).
The ratings of Highmark Inc. Group reflect its balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, favorable business profile and appropriate enterprise risk management (ERM).
The Long-Term ICR upgrades reflect improvement in Highmark Inc. Group’s business profile to favorable, based on the organization’s expanding geographic and product diversification. The affiliation with Highmark of Western & Northeastern New York (formerly known as HealthNow New York Inc.) and acquisition of Gateway Health Plan, Inc., expands the organization’s geographic presence into a fourth state, New York, and enhances its overall scale and business capabilities specifically within the Medicaid and Medicare Advantage markets. This increase in geographic reach and market presence, combined with the organization’s continued innovation efforts and expertise in the provider space, is expected to enhance the Highmark organization’s market position through a combination of organic- and affiliate-based growth. Furthermore, Highmark Inc.’s national stop-loss business, which operates as HMIG, as well as its national dental business under the United Concordia name, add to the product and geographic diversification of the organization.
Highmark Inc. Group continues to maintain the strongest level of risk-adjusted capital, as measured by Best’s Capital Adequacy Ratio (BCAR), based on earnings retention and profitability over the past four years. Highmark Inc. Group’s operating results in 2020 were driven by favorable underwriting results that arose due to a combination of the receipt of a risk-corridor payment relating to the 2014-2016 terms from the federal government, and decreased benefit utilization due to economic restrictions put in place to combat the COVID-19 pandemic. Net results in 2017-2020 and into 2021 were enhanced by a series of one-time events: the sale of subsidiaries Davis Vision in 2017 and Visionworks in 2019; the risk corridor payment and benefit reductions due to COVID-19 in 2020; and a large gain on the affiliation with Highmark of Western & Northeastern New York in 2021. Premium development has been challenging for the group due to competitive and economic pressure in its primary markets, but Highmark Inc. Group reported growth in 2020 due to a combination of higher rates and the risk-corridor payment recorded as premium revenue. The Highmark organization is the fourth-largest Blue Cross Blue Shield plan in the United States, offering health products and services across four states with the addition of New York in 2021. Highmark Inc. has good business diversification through its national medical stop-loss business, national dental operations and technology platform services. Highmark Inc. also is part of an integrated delivery system with its affiliate, Allegheny Health Network, in its Western Pennsylvania service area, offering coordinated, high-quality and cost-effective care and health insurance products. The Highmark organization also has a well-developed and comprehensive ERM program, which is incorporated into business operations and strategic planning.
The ratings of United Concordia reflect its balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate ERM.
The upgrade of the Long-Term ICRs of United Concordia reflect the strategic importance as the nationwide dental operations of Highmark Inc.
United Concordia’s risk-adjusted capitalization increased in 2020 after planned reductions over the previous two years due to dividend payments to its parent that exceeded net earnings. The current year increase in capitalization was due to earnings that exceeded the 2020 dividend payments. Risk-adjusted capital, as measured by BCAR, remains at the very strong level. Underwriting income trends have been favorable, driven in part by the company’s government contracts, including the Federal Employees Dental and Vision Insurance Program and TRICARE Dental Plan, and in 2020 by reduced utilization due to the pandemic. Premium growth had been consistent pre-pandemic, but the economic fallout and the premium credits granted as a result of pandemic restrictions drove minimal growth in 2020. United Concordia has a large membership base, with more than nine million individuals, and a large national dental network with over approximately 126,000 dentists.
The ratings of Highmark Casualty reflect its balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, limited business profile and appropriate ERM.
The Long-Term ICR upgrade for Highmark Casualty reflects its strategic importance to Highmark Inc. as it assumes stop-loss business from HM Life Insurance Company, and is considered part of HMIG’s operations.
The Long-Term ICR has been upgraded to “a+” (Excellent) from “a” (Excellent) and the FSR of A (Excellent) has been affirmed, with stable outlooks, for Highmark Inc. and its following life/health subsidiaries:
• HM Health Insurance Company
• HM Life Insurance Company
• HM Life Insurance Company of New York
• Highmark Choice Company
• Highmark West Virginia Inc.
The Long-Term ICR has been upgraded to “a+” (Excellent) from “a” (Excellent) and the FSR of A (Excellent) has been affirmed, with stable outlooks, for the following dental subsidiaries of Highmark Inc.:
• United Concordia Companies, Inc.
• United Concordia Insurance Company
• United Concordia Insurance Company of New York
• United Concordia Dental Plans of California, Inc.
• United Concordia Dental Plans of Pennsylvania, Inc.
• United Concordia Dental Plans, Inc.
The following Long-Term IR has been upgraded, with a stable outlook:
Highmark Inc.— to “a” (Excellent) from “a-” (Excellent) on $250 million 6.125% senior unsecured notes, due 2041
About Highmark Inc.
One of America's leading health insurance organizations and an independent licensee of the Blue Cross Blue Shield Association, Highmark Inc. (the Health Plan) and its affiliated health plans (collectively, the Health Plans) work passionately to deliver high-quality, accessible, understandable, and affordable experiences, outcomes, and solutions to customers. As the fourth-largest overall Blue Cross Blue Shield-affiliated organization, Highmark Inc. and its Blue-branded affiliates proudly cover the insurance needs of more than 6 million members in Pennsylvania, Delaware, New York and West Virginia. Its diversified businesses serve group customer and individual needs across the United States through dental insurance and other related businesses. For more information, visit www.highmark.com.
Highmark Blue Cross Blue Shield serves the 29 counties of western Pennsylvania and 13 counties of northeastern Pennsylvania. Highmark Blue Shield serves the 21 counties of central Pennsylvania and also provides services in conjunction with a separate health plan in southeastern Pennsylvania. Highmark Blue Cross Blue Shield West Virginia serves the state of West Virginia plus Washington County. Highmark Blue Cross Blue Shield Delaware serves the state of Delaware. Highmark Western and Northeastern New York Inc., serves eight counties in Western New York under the trade name Highmark Blue Cross Blue Shield of Western New York and serves 13 counties in Northeastern New York under the trade name Highmark Blue Shield of Northeastern New York. Each of these companies is an independent licensee of the Blue Cross Blue Shield Association. Blue Cross, Blue Shield and the Blue Cross and Blue Shield symbols are registered marks of the Blue Cross Blue Shield Association, an association of independent Blue Cross and Blue Shield companies. All references to “Highmark” in this document are references to the Highmark company that is providing the member’s health benefits or health benefit administration.
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