AM Best Affirms Credit Ratings of Highmark, Inc. and Its Subsidiaries

Business Wire

OLDWICK, N.J.--(BUSINESS WIRE)-- AM Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a” of Highmark Inc. (Highmark) (Camp Hill, PA) and its life/health subsidiaries, collectively known as Highmark Inc. Group. Concurrently, AM Best has affirmed the FSRs of A (Excellent) and the Long-Term ICRs of “a” of Highmark’s dental subsidiaries, which operate under the United Concordia brand name. Additionally, AM Best has affirmed the FSR of A- (Excellent) and Long-Term ICR of “a-” of Highmark Casualty Insurance Company (Highmark Casualty) (Pittsburgh, PA). Lastly, AM Best has affirmed the Long-Term Issue Credit Ratings (Long-Term IR) of “a-” on Highmark’s existing senior unsecured notes. The outlook for all Credit Ratings (ratings) remains stable. (See below for a detailed listing of the companies and the Long-Term IRs).

The ratings of Highmark Inc. Group reflect its balance sheet strength, which AM Best categorizes as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).

Highmark’s strongest level of risk-adjusted capitalization is supported by the strong operating results from its core health insurance business. Furthermore, the balance sheet and operating performance of Highmark’s affiliate, Allegheny Health Network (AHN) has improved over the past two years, which relieves pressure on the balance sheet assessment of Highmark. Highmark has reported especially strong underwriting results over the past two years due to improved results in commercial and Medicare Advantage business, as well as a turnaround in the groups’ medical stop-loss business written predominantly by HM Life Insurance Company over the past year. AM Best notes that prior year operating results were elevated due to gains on the sale of Highmark subsidiary Davis Vision. Premium revenue has declined based on enrollment losses in individual, employer group and Medicare Advantage lines of business due to market conditions and competitive pressure.

While Highmark is a market leader in providing health products and services in its Blue Plan service areas in Pennsylvania, Delaware and West Virginia, it is geographically constrained. To offset this, Highmark diversifies its revenue and earnings through its dental and stop-loss insurance products, as well as its technology platform services. Highmark and AHN operate as an integrated system to provide high quality cost-efficient healthcare delivery and financing in Pennsylvania. Highmark’s ERM program is comprehensive and well-developed. The program is appropriate for the risk and profile of Highmark’s business and operations.

The ratings of United Concordia reflect its balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, neutral business profile and appropriate ERM.

United Concordia’s risk-adjusted capitalization has declined modestly over the past year based on the full year impact of the premiums from TRICARE Dental Program (TDP) contract and dividends to the parent offsetting net earnings. Premiums for United Concordia have grown with the addition of the TDP contract, which it started to service in May 2017. Earnings have grown based on the increased premiums and margins have remained steady for the past two years. United Concordia has a large enrollment of almost 8 million individuals and is one of the largest dental networks in the United States. However, enrollment has fluctuated based on the loss of government contracts in the past.

The ratings of Highmark Casualty reflect its balance sheet strength, which AM Best categorizes as strongest, as well as its adequate operating performance, limited business profile and appropriate ERM.

Highmark Casualty’s strongest balance sheet assessment is driven by its high level of absolute capital in relation to its business and investment risk. Operating results has been consistently positive; however, there has been a fair degree of volatility in the level of premium and earnings based on product changes and the strategic focus of the company. Currently, the company assumes the majority of its premium revenue for medical stop-loss business from its affiliate, HM Life Insurance Company.

The FSR of A (Excellent) and the Long-Term ICRs of “a” have been affirmed with a stable outlook 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 FSR of A (Excellent) and the Long-Term ICRs of “a” have been affirmed with a stable outlook 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 FSR of A- (Excellent) and the Long-Term ICRs of “a-” have been affirmed with a stable outlook for Highmark Casualty Insurance Company an insurance subsidiary of Highmark, Inc.

The following Long-Term IRs have been affirmed with a stable outlook:

Highmark Inc.—
--“a-” on $350 million 4.75% senior unsecured notes, due 2021
--“a-” on $250 million 6.125% senior unsecured notes, due 2041

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 Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global rating agency and information provider with a unique focus on the insurance industry. Visit www.ambest.com for more information.