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A.M. Best Takes Various Rating Actions on Cambia Health Solutions, Inc. Affiliates


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Doniella Pliss
Managing Senior Financial Analyst
+1 908 439 2200, ext. 5104
doniella.pliss@ambest.com

Sally Rosen
Vice President
+1 908 439 2200, ext. 5280
sally.rosen@ambest.com

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com

Jim Peavy
Assistant Vice President, Public Relations
+1 908 439 2200, ext. 5644
james.peavy@ambest.com

FOR IMMEDIATE RELEASE

OLDWICK - AUGUST 26, 2016 12:45 PM (EDT)
A.M. Best has upgraded the financial strength rating (FSR) to A (Excellent) from A- (Excellent) and the issuer credit ratings (ICR) to “a” from “a-” of Regence BlueCross BlueShield of Oregon (Regence BCBSO) (Portland, OR) and Regence BlueCross Blue Shield of Utah (Regence BCBSUT) (Salt Lake City, UT). The outlook for each rating has been revised to negative from stable. In addition, A.M. Best has assigned an FSR of A (Excellent) and an ICR of “a” to Commencement Bay Life Insurance Company (CBL) (Seattle, WA). The outlook assigned to each rating is negative. Concurrently, A.M. Best has affirmed the FSR of A (Excellent) and the ICR of “a” of Regence Blue Shield (RBS) and Asuris Northwest Health (both domiciled in Seattle, WA). The outlook for each of these ratings is negative. At the same time, A.M. Best has revised the outlooks to negative from stable and affirmed the FSR of A- (Excellent) and the ICR of “a-” of LifeMap Assurance Company (LifeMap) (Portland, OR). All companies are affiliated through Cambia Health Solutions, Inc. (CHS), a non-profit, non-insurer holding company.

The rating upgrades reflect A.M. Best’s increased consideration for Regence BCBSO and Regence BCBSUT from benefits and efficiencies achieved through the unified CHS strategy, leveraging of corporate-wide management and operational resources, and strong regional market share and name recognition of the Regence plans. The Regence plans are among the largest health insurance carriers in their respective states, with overall enrollment exceeding 1.5 million members at year-end 2015. Consolidated earnings for the Regence plans remained positive, although modest, over the past four years, as investment income and realized gains offset the underwriting losses. Favorable earnings combined with lower premium and changes in investment allocations contributed to stronger risk-adjusted capitalization. A.M. Best considers the current level of consolidated risk-adjusted capitalization to be very strong and more than adequate to cover the plans’ financial obligations.

The negative outlooks reflect underwriting losses that have exceeded $260 million since 2011 for Regence BCBSO, Regence BCBSUT and RBS combined. Over the past two years, factors that negatively impacted earnings in all markets included reduced reimbursement in the Medicare Advantage segment, an uptick in large claims and losses in the self-funded segment. However, earnings have posted year-over-year improvement and were ahead of projections as of June 30, 2016. In addition, the Regence plans continue to face a decline in fully insured enrollment, and a lack of revenue growth due to a combination of challenging competitive environment and strategic choices. Overall enrollment at the Regence plans has experienced a substantial decrease over the past five years, driven by competitive pressures and CHS’ corporate strategy to reduce exposure to certain market segments, with a focus on capital preservation rather than membership growth. As a result, the share of fully insured membership at the Regence plans has been gradually declining, while a self-funded segment with much lower revenue and margin potential has expanded. A.M. Best is concerned that the Regence companies will remain challenged to grow its revenue and earnings and subsequently maintain its market position given the changed profile of its membership base.

The ratings assigned to CBL, a wholly owned subsidiary of RBS, reflect the business plan to transfer specific lines of business from the Regence plans. In addition, the ratings reflect the parental support and a planned capital contribution to CBL from RBS. A.M. Best will monitor CBL’s premium growth and level of risk-adjusted capitalization, and expects the parent to provide additional capital infusions if needed.

The rating affirmations of LifeMap reflect its good level of risk-adjusted capitalization, diversified product portfolio and support of its minority owner, Regence BCBSO, through a full guarantee. The negative outlooks reflect persistent underwriting and operating losses, as well as the difficulty in achieving profitable growth in its core segments.

This press release relates to rating(s) 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.

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