[February 28, 2013]

Fitch Publishes Credit Overview on Blue Cross Blue Shield Companies

Fitch Ratings has published a special report providing a credit overview of Blue Cross and Blue Shield (BCBS) licensed health insurance and managed care companies. The report discusses the BCBS system's formation and growth and BCBS companies' common credit strengths and weaknesses, as well as key credit challenges. The report also includes a comparison of company-specific size/scale characteristics and quantitative credit factors as they relate to Fitch's median rating category guidelines.

Fitch estimates the health business enrollment of these companies at roughly 67 million and views the companies' rights to use Blue Cross and or Blue Shield trademarks and copyrights as significant competitive advantages.

Common credit strengths cited in the report include strong provider networks that contribute to large market shares in chosen markets, robust capitalization metrics, modest liquidity needs and consistently strong reserves as measured by development of the number of days in claims payable ratios.

Common credit weaknesses include enrollment concentrations in a single or limited number of states resulting in heightened exposure to local competitive, economic, and political conditions. Additionally, rates of return on revenue and on capital are often lower and capital exposure to equity investment volatility is often comparatively high.

Fitch sees the BCBS companies' key challenges as balancing strategies arising from their nonprofit status and/or private ownership with the need to generate earnings and capital required to make adequate and efficient investments in their businesses.

Other challenges include reducing concentration risks and adding scale and funding pension plan liabilities in the current low interest rate environment. Finally, the agency believes that adapting to a post-healthcare reform insurance exchange environmet poses unique challenges for the BCBS Companies.

Fitch's special report, 'Blue Cross/Blue Shield Credit Overview' is available at www.fitchratings.com'.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Insurance Rating Methodology' (Jan. 11, 2013)

--Health Insurance and Managed Care (U.S.) Sector Credit Factors Special Report (Jan. 29, 2013).

Methodology' (Jan. 11, 2013)

--Health Insurance and Managed Care (U.S.) Sector Credit Factors Special Report (Jan. 29, 2013).

Applicable Criteria and Related Research Blue Cross/Blue Shield Companies: Credit Overview

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm rpt_id=701552

Insurance Rating Methodology - Amended

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm rpt_id=698731

Health Insurance and Managed Care (U.S.)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm rpt_id=699758

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON (News - Alert) THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.

[ Back To TMCnet.com's Homepage ]