Blue Cross & Blue Shield of Nebraska Ratings Affirmed; Outlook Stable.Business Editors NEW YORK--(BUSINESS WIRE)--Oct. 3, 2003 On Oct. 3, 2003, Standard & Poor's Ratings Services Ratings Service A company, such as Moody's or Standard & Poor's, that rates various debt and preferred stock issues for safety of payment of principal, interest, or dividends. affirmed its 'A+' counterparty credit and financial strength ratings on 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 Nebraska (BCBSNE BCBSNE Blue Cross Blue Shield of Nebraska ) based on the company's extremely strong capital position and earnings, as well as its good business position, offset by a high concentration in both market and client risk. The outlook is stable. In a related matter, on Oct. 3, 2003, the ratings on BCBSNE's life subsidiary, Omaha Life Insurance Co., were lowered to 'BBB' from 'A+' and then subsequently withdrawn at the company's request. The downgrade Downgrade A negative change in the rating of a security. Notes: For example, an analyst may downgrade a stock from strong buy to buy, or a bond rating agency may downgrade a bond from AAA to AA. was based on the withdrawal of an explicit support guaranty As a verb, to agree to be responsible for the payment of another's debt or the performance of another's duty, liability, or obligation if that person does not perform as he or she is legally obligated to do; to assume the responsibility of a guarantor; to warrant. agreement from BCBSNE. Omaha Life is now rated on a standalone basis as a company operating essentially in runoff Runoff The procedure of printing the end-of-day prices for every stock on an exchange onto ticker tape. Notes: If the "tape is late" then it can take a long time to print off all the closing prices. since it is no longer writing new business. Any potential future policies will not carry the BCBSNE unconditional support agreement afforded to its previous customers. Outlook The stable outlook on BCBSNE reflects the expectation that the company will maintain its strong competitive advantage in health insurance within the state of Nebraska. Earnings will continue to improve as management has made a strategic decision to not go after unprofitable business for the sake of growing market share. Pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern statutory earnings for 2003 are expected to be about $40 million. Capital adequacy is expected to remain extremely strong and stay in excess of 300%. Core medical membership is expected to be flat in light of the decision to not chase market share. Major Rating Factors -- Extremely strong capital position. The capital adequacy ratio Capital adequacy ratio (CAR), also called Capital to Risk (Weighted) Assets Ratio (CRAR)[], is a ratio of a bank's capital to its risk. National regulators track a bank's CAR to ensure that it can absorb a reasonable amount of loss. , as measured by Standard & Poor's model, was 323% at year-end 2002. The company's superior level of excess reserves Excess reserves Amount of reserves held by an institution in excess of its reserve requirement and required clearing balance. Also see reserves. Excess reserves Actual reserves that exceed required reserves. relative to required capital allows it significant operating flexibility and growth opportunities. -- Extremely strong earnings. BCBSNE has very strong earnings, as demonstrated by an earnings adequacy ratio of 300% --based on Standard & Poor's model--for the five-year period ended Dec. 31, 2002. Earnings have been in line with expectations in recent years and are a sharp improvement from the $24 million loss in 1998, which included a $19 million premium deficiency reserve related to the state employee group. Statutory pretax gains were $42.6 million in 2002 and were an additional $28.3 million through June 2003. -- Good business position. BCBSNE provides traditional and managed-care health products and services to about 30% of the Nebraska population. The company has established competitive scale efficiencies and has also built a very good working relationship with the provider system, which has enabled it to provide coverage on a statewide basis. BCBSNE has focused on the large group and individual markets. -- High business concentration. About 85% of BCBSNE's core business is aligned with the large group market. BCBSNE's revenue stream is constrained con·strain tr.v. con·strained, con·strain·ing, con·strains 1. To compel by physical, moral, or circumstantial force; oblige: felt constrained to object. See Synonyms at force. 2. by its significant reliance on one segment of the market, a few large customers, and single-state focus. Blue Cross & Blue Shield of Nebraska Counterparty credit rating A+/Stable/-- Financial strength rating A+/Stable/-- RELATED RATINGS Omaha Life Insurance Co. Counterparty credit rating NR Financial strength rating NR Complete ratings information is available to subscribers of RatingsDirect, Standard & Poor's Web-based credit analysis system, at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com; under Credit Ratings in the left navigation bar A set of buttons or graphic images typically in a row or column used as a central point that link you to major topic sections on a Web site. If the navigation bar is a single graphic image with multiple selections, it is known as an imagemap. See imagemap. , select Credit Ratings Lists. Standard & Poor's ratings appear alphabetically. |
|
||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion