A.M. Best Raises Rating of Wellmark of South Dakota; Affirms Ratings of Wellmark and Wellmark Health Plan of Iowa.Business Editors A.M. Best Co. has raised the financial strength rating to A (Excellent) from A- (Excellent) of Wellmark of South Dakota South Dakota (dəkō`tə), state in the N central United States. It is bordered by North Dakota (N), Minnesota and Iowa (E), Nebraska (S), and Wyoming and Montana (W). (WellmarkSD), Sioux Falls Sioux Falls, city (1990 pop. 100,814), seat of Minnehaha co., SE S.Dak., on the Big Sioux River; settled 1856, inc. as a village 1877, as a city 1883. Settlers abandoned the site in 1862 because of Native American raids, but with the establishment (1865) of Fort . A.M. Best has also affirmed the A (Excellent) financial strength rating of Wellmark Inc. (Wellmark) and the A- (Excellent) financial strength rating of Wellmark Health Plan of Iowa (WHPI), both of Des Moines Des Moines, city, United States Des Moines (dĭ moin`), city (1990 pop. 193,187), state capital and seat of Polk co., S central Iowa, at the junction of the Des Moines and Raccoon rivers; inc. . The rating outlook for all companies is stable. The ratings of Wellmark and its subsidiaries reflect the company's strong market presence in its selected health insurance markets and sound financial condition. Offsetting factors include a large investment in equities and modest 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. on some lines of business. Wellmark, operating as Wellmark Blue Cross & Blue Shield Blue Shield A US not-for-profit health care insurer that is a reimbursement intermediary for physicians. Cf Blue Cross. of Iowa, and its subsidiaries, WellmarkSD (doing business as Wellmark Blue Cross & Blue Shield of South Dakota) and WHPI, a health maintenance organization (HMO HMO health maintenance organization. HMO n. A corporation that is financed by insurance premiums and has member physicians and professional staff who provide curative and preventive medicine within certain financial, ), have an established market presence in their respective markets with market share in Iowa and South Dakota at 48% and 36%, respectively. Earnings have been good with net income in excess of $17 million in four of the last five years. After reporting a net loss of $6 million in 1999, the company has reported net income of over $20 million for the past two years. The growth of profitability has been a result of exiting non-strategic business lines, refining pricing and the leveraging of information technology to cut transaction processing Updating the appropriate database records as soon as a transaction (order, payment, etc.) is entered into the computer. It may also imply that confirmations are sent at the same time. Transaction processing systems are the backbone of an organization because they update constantly. costs. Wellmark's good earnings history has built a capital position that is more than adequate to support its operations. The lack of any debt within the organization combined with continued profitability allows Wellmark to maintain a sound risk-adjusted capital position. While Wellmark's capital position is solid, it has significant exposure to investment in equities. In 2001, equities represented 90% of capital and surplus, excluding investments in subsidiaries. While A.M. Best remains concerned with the potential volatility from the large portion of equity investments, A.M. Best does recognize that the growth in the company's operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. has made Wellmark less dependent on investment income. Operating income--while strong--has been reduced by losses from the individual health insurance segment in South Dakota and the large group fully insured segment in Iowa. Individual health insurance in South Dakota is moderately regulated with a requirement to include a specific guaranteed issue product. The large group fully insured segment has been showing steady improvement in each year with the implementation of rate increases and the termination of certain policies. A.M. Best expects the losses in the South Dakota individual health and in the Iowa insured large group segment to return to profitability in one or two years. 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 from other large group segments have been strong, returning an adequate level of overall operating income. 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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