Fitch Affirms 'BBB+' Rating on BCBS of Florida's $150MM Surplus Notes.Business Editors NEW YORK--(BUSINESS WIRE)--March 19, 2004 Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. today affirmed its 'BBB+' rating 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 Florida's (BCBSF BCBSF Blue Cross/Blue Shield of Florida or the company) $150 million, 8.25% surplus notes due 2011. The Rating Outlook is Stable. The rating reflects BCBSF's excellent market position and brand name, strong balance sheet and good earnings profile. The rating also considers the company's limited geographical diversification, Fitch's outlook for increased commercial pricing competition in 2004 and into 2005, and challenges associated with rising medical costs and evolving regulatory environment. While the company had significantly reduced its exposure to the Medicare+Choice market place over the past few years, Fitch believes the recent Medicare reform has greatly reduced any lingering lin·ger v. lin·gered, lin·ger·ing, lin·gers v.intr. 1. To be slow in leaving, especially out of reluctance; tarry. See Synonyms at stay1. 2. concerns over the near-term viability of this business. Significant new market opportunities continue to emerge for the company to develop products and services that will meet the unique needs of Florida's rapidly growing and senior market. BCBSF's core business is selling health insurance products and services in the state of Florida using the Blue Cross and Blue Shield trademarks. The company has built a leading market position in the state of Florida, providing health services health services Managed care The benefits covered under a health contract through the parent and its family of subsidiaries to approximately 3.4 million individuals in Florida, which represents a market share of approximately 28%. The company's strong market position, combined with its use of the Blue Cross and Blue Shield trademarks, represents a significant competitive advantage in the Florida health care market. BCBSF's presence provides the company with greater market knowledge, greater access to providers, and the ability to negotiate more favorable rates and build strong networks. Profitability is considered good, with GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: of 5.7% through December 31, 2003 compared to 4.4% through December 31, 2002. On a consolidated GAAP basis, BCBSF earned pretax income pretax income Reported income before the deduction of income taxes. Pretax income is sometimes considered a better measure of a firm's performance than aftertax income because taxes in one period may be influenced by activities in earlier periods. of $425 million through December 31, 2003 compared to GAAP pretax income of $284 million through December 31, 2002. Better than expected earnings in 2003 resulted from favorable rate increases and effective medical management. Looking ahead, Fitch believes that operating margins generated by BCBSF in 2003 are probably not sustainable at current levels. Fitch expects BCBSF to report pretax operating margins in the 5.0% range in 2004, which is considered good, and pretax 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. in the $320 million range. The company's strong balance sheet reflects very strong statutory capitalization, excellent asset quality and liquidity, and modest financial leverage. Absolute statutory capital has reached $1.2 billion at the end of 2003. BCBSF maintains a conservative investment portfolio with very good liquidity. The company's generally short-term nature of its liability structure is supported by a liquid portfolio. The majority is invested in bonds, with approximately 90% of issues rated 'A' or higher. Cash and equivalents accounted for approximately 12% at December 31, 2003. Financial leverage (as measured by total debt-to-capital) is modest at approximately 9.0% at year-end 2003, and interest coverage is very strong at greater than 39 times (x) at year-end 2003. Entity/Issue/Type Action Rating/Outlook Blue Cross Blue Shield of Florida -- $150MM 8.25% Surplus Note Affirm 'BBB+'/Stable. |
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