A.M. Best Downgrades Ratings of Blue Cross and Blue Shield of Kansas Inc and Its Affiliates.Business Editors OLDWICK, N.J.--(BUSINESS WIRE)--Sept. 27, 2002 A.M. Best Co. has downgraded the financial strength ratings to B++ (Very Good) from A- (Excellent) of Blue Cross and Blue Shield Blue Shield A US not-for-profit health care insurer that is a reimbursement intermediary for physicians. Cf Blue Cross. of Kansas Inc (BCBSKS) and its affiliates, Premier Health Inc, both of Topeka, KS and Advance Insurance Company (Phoenix). The outlook is stable. These rating actions reflect BCBSKS' continued losses associated with its small group business and its weakened weak·en tr. & intr.v. weak·ened, weak·en·ing, weak·ens To make or become weak or weaker. weak  en·er n. capital
position, which resulted from those losses and investment losses related
to the company's high exposure to equity markets.
Earlier this year, BCBSKS and its affiliates were placed under review with negative implications pending the resolution of the for-profit conversion issues with the Insurance Commissioner and the proposed subsequent merger with Anthem anthem [ultimately from antiphon], short nonliturgical choral composition used in Protestant services, usually accompanied and having an English text. The term is used in a broader sense for "national anthems" and for the Latin motets still used occasionally in , Inc. Since the merger process has taken longer than anticipated, in the interim the ratings must properly mirror the current operations of this organization on a stand-alone basis. A.M. Best believes when the Anthem merger occurs, BCBSKS' earnings stream should become less volatile. BCBSKS is the state's oldest and largest health insurer company. It serves over 35% of the Kansas market, and that percentage increases to 43% when the BlueCard Host membership is added. BCBSKS has a diverse managed care portfolio and holds the Medicare Part A and B administration contracts for Kansas as well as Medicare Part B contracts for Nebraska and western Missouri, thus providing major strengths. This gives BCBSKS the ability to develop and maintain professional and long-standing relationships with medical provider networks. BCBSKS contracts with 98% of practicing physicians and all but one acute care hospitals in the Kansas plan operating area. BCBSKS built its capital strength solely through capital gains and investment returns and not through operating performance -- which is typical of non-profit mutuals. BCBSKS maintains a good capital position, although it weakened in 2001 and continues to decline in 2002, on account of continuing operating losses operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. associated with BCBSKS' small group business, combined with investment losses. This is due to BCBSKS' sizable siz·a·ble also size·a·ble adj. Of considerable size; fairly large. siz a·ble·ness n. investments in equities and the significant
decrease in capital that occurred in 1999, which is attributable to the
plan's settlement payment of $75 million to the state of Kansas to
convert to a mutual company. A.M. Best acknowledges that BCBSKS has
gradually increased rates, as well as tightened underwriting Underwriting1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. controls to achieve favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. operating earnings Operating Earnings Profits after subtracting expenses such as marketing, cost of goods sold, administration and general operating costs from revenue. Notes: Tax and interest expenses are not subtracted - operating earnings are synonymous with EBIT (earnings before and has been somewhat successful in reducing small group losses in 2002. Nevertheless, A.M. Best does not anticipate that BCBSKS will return to historical levels of profitability in the near term. By reason of BCBSKS's significant concentration in equities, it has experienced sizable fluctuations in investment income because of the cyclical cyclical Of or relating to a variable, such as housing starts, car sales, or the price of a certain stock, that is subject to regular or irregular up-and-down movements. nature of the equity markets, consequently negatively impacting overall capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets. . The financial strength ratings of A- (Excellent) have been downgraded to B++ (Very Good) for the following subsidiaries of Blue Cross and Blue Shield of Kansas: -- Blue Cross and Blue Shield of Kansas Inc -- Premier Health Inc -- Advance Insurance Company A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com. |
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