AM Best has removed from under review with developing implications and affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a” (Excellent) of California Physicians’ Service (d/b/a Blue Shield of California) and Blue Shield of California Life & Health Insurance Company (Blue Shield Life) (both companies are members of Blue Shield of California Group) (both companies are domiciled in Oakland, CA). The outlook assigned to these Credit Ratings (ratings) is stable.
In addition, AM Best has affirmed the FSR of B++ (Good) and the Long-Term ICR “bbb+” (Good) of CareAmerica Life Insurance Company (CareAmerica) (domiciled in Oakland, CA). The outlook of these credit ratings is stable.
The ratings reflect Blue Shield of California Group’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.
The rating was placed under review following a sizeable decline in earnings at year-end 2022 and some uncertainty regarding the group’s projected improvement in financial result. The decline in earnings was driven by higher than expected utilization across multiple lines of business. However, rate increases and other corrective measures led to material improvement of underwriting results through the first six months of 2023. The group expects financial results to remain positive through the rest of 2023 and into 2024.
Blue Shield of California Group’s balance sheet strength is underpinned by its risk-adjusted capitalization, which deteriorated from strongest to the very strong category through 2022, primarily driven by significant drop in earnings. In addition, the group’s common stock portfolio was negatively affected by the significant investment market volatility in 2022 with unrealized losses contributing to a decrease in surplus and risk-adjusted capitalization. However, risk-adjusted capitalization has improved through the first half of 2023 driven by significant improvement in operating earnings and partial recovery of unrealized investment losses. Further, balance sheet strength assessment continues to be supported by a high-quality fixed income investment portfolio and strong liquidity measures, with overall liquidity at over 200% throughout the most recent five-year period and the first half of 2023. In addition, the group’s financial flexibility is enhanced through access to lines of credit.
Blue Shield of California Group has a solid business profile driven by its well-established and strong market position and overall topline growth through 2023. Additionally, the group's product portfolio is diversified, offering a good spread of revenue and earnings. Blue Shield's integrated business approach has allowed for an efficient cost structure and management of its diverse business activities, which enables the group to historically perform at a profitable level, except for 2022, while servicing the needs of its members.
The ratings reflect CareAmerica’s balance sheet strength, which AM Best assesses as very strong, as well as its marginal operating performance, very limited business profile and appropriate enterprise risk management.
The affirmation of CareAmerica's ratings primarily reflects A.M. Best's view of its reduced strategic importance to the overall organization and its limited business profile given the run-off nature of operations. Due to its healthy level of risk-adjusted capital, CareAmerica remains a potential source of dividends for its parent.
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 Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.
Copyright © 2023 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.
Senior Financial Analyst
+1 908 882 1637
+1 908 882 2245
Associate Director, Public Relations
+1 908 882 2310
Senior Public Relations Specialist
+1 908 882 2318