A.M. Best Affirms Ratings of Affiliates of Cambia Health Solutions [Health & Beauty Close – Up]

Proquest LLC

A.M. Best Company has affirmed the financial strength rating of A (Excellent) and issuer credit ratings of a of Regence BlueShield and its subsidiary, Asuris Northwest Health (both domiciled in Seattle, Wash.).

In a release dated June 15, A.M. Best also has affirmed the FSR of A- (Excellent) and ICR of a- of RBS' subsidiary, LifeMap Assurance Company (Portland, Ore.), Regence BlueCross BlueShield of Oregon (Portland, Ore.), as well as Regence BlueCross BlueShield of Utah and its subsidiary, HealthWise (both domiciled in Salt Lake City). The outlook for all ratings is stable. All companies are affiliates of Cambia Health Solutions (Portland, Ore.).

The rating affirmations recognize the companies' solid risk- based capitalization, improved administrative cost structure and affiliation with Cambia. Over the last several years, the level of RBC, driven by capital and surplus growth accompanied by premium decline, remained strong and adequate for the ratings at all Cambia affiliates. In addition, the affiliation with Cambia has enabled RBS, Asuris, LifeMap, Regence BCBSO, Regence BCBSUT and HealthWise to leverage corporate services and achieve improved levels of efficiencies in technology and product design that resulted in a lower administrative expense ratio for all affiliates in 2011.

Offsetting rating factors include sizeable membership decline, deteriorated earnings and regulatory environment challenges in both Oregon and Washington. During the last five years, the combined fully insured enrollment of Cambia affiliates experienced over 40 percent decline. This trend is expected to continue in 2012. In addition, during 2011, RBS, Regence BCBSO, Regence BCBSUT and LifeMap posted underwriting losses driven by a higher medical loss ratio resulting from competitive pressures and pricing closer to trend in several lines of business. A.M. Best is concerned that the declining volume of business, combined with weak underwriting results and the challenging regulatory environment in Washington and Oregon may pressure future earnings.

All Cambia affiliates are well positioned for the current ratings. Factors that may lead to negative rating actions include significant deterioration of operating performance, substantial decline of risk-based capitalization and higher than expected enrollment losses.

A.M. Best Company is an insurance rating and information source.