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FOR IMMEDIATE RELEASE
OLDWICK - JULY 23, 2014 04:29 PM (EDT)
A.M. Best has affirmed the financial strength rating of A- (Excellent) and issuer credit ratings of "a-" of Medco Containment Life Insurance Company (MCLIC) (Mechanicsburg, PA) and Medco Containment Insurance Company of New York (MCICNY) (Troy, NY). The outlook for all ratings is stable.
The ratings are based on MCLIC and MCICNY's continued positive financial results, favorable risk-adjusted capitalization at both entities and the strategic importance of their ultimate parent company, Express Scripts Holding Company (Express Scripts) [NASDAQ: ESRX]. Margins for both companies have trended favorably over the medium term and capital levels are more than adequate for their current level of the Medicare Part D Stand-Alone Prescription Drug Plan business. The margin improvement is attributed to a decline in utilization at both Medco plans. The growth of the capital levels is mainly the result of strong net earnings and lack of dividends paid. A.M. Best expects capital support will be provided by Express Scripts when necessary.
Offsetting these positive rating factors are declines in near-term membership and uneven growth over the long term. Furthermore, the companies' product portfolios have very little diversification and consist of only Medicare Part D products. In addition, marketing efforts mainly target the senior population. All revenues are expected to be derived from Medicare Part D products in the long term.
Factors that may positively affect the companies' ratings include additional product diversity and sustained long-term earnings. Key drivers that could lead to negative rating actions include a trend of losses or capital deterioration beyond A.M. Best's expectations. Negative rating pressure also could occur if MCLIC and MCICNY become less strategically important to Express Scripts.
The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology .
A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.