Oldwick, NJ -(BusinessWire)- AM Best has affirmed the Financial Strength Rating (FSR) of A- (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a-” of UPMC Health Plan, Inc. and its affiliates: UPMC For You, Inc., UPMC Health Network, Inc., UPMC Health Coverage, Inc., UPMC Health Options, Inc. and Community Care Behavioral Health Organization (CCBH). Collectively, the group is referred to as UPMC Health Plans. The outlook of these Credit Ratings (ratings) is stable.
Concurrently, AM Best assigned a FSR of A- (Excellent) and a Long-Term ICR of “a-” to WorkPartners National, Inc. The outlook assigned to these ratings is stable. Additionally, AM Best has affirmed the FSR of A- (Excellent) and the Long-Term ICRs of “a-” of UPMC Health Benefits, Inc. and UPMC Work Alliance, Inc., which primarily offer workers’ compensation products. The outlook of these ratings is stable. The three companies collectively are referred to as UPMC Workers’ Compensation Group. All companies are headquartered in Pittsburgh, PA.
The ratings of UPMC Health Plans reflect the companies’ balance sheet strength, which AM Best categorizes as adequate, as well as their adequate operating performance, neutral business profile, appropriate enterprise risk management and support of the parent, University of Pittsburgh Medical Center (UPMC).
The ratings affirmations also reflect UPMC Health Plans’ risk-adjusted capitalization at the weak level, as measured by Best’s Capital Adequacy Ratio (BCAR). Variability in underwriting income and repayment of surplus notes impacted surplus generation in recent years; however, consistent favorable operating income has provided a basis for organic generation of surplus during the most recent five-year period and through 2020. Furthermore, the quality of capital has improved as the percentage of surplus notes to capital and surplus has declined substantially over the last five years. The balance sheet strength assessment is supported by UPMC Health Plans’ very conservative investment portfolio with high levels of cash and investment grade fixed-income securities. In addition, AM Best considers UPMC Health Plans’ financial leverage to be low.
Additionally, UPMC Health Plans have demonstrated a favorable overall trend of operating performance, which has continued throughout 2020. UPMC Health Plans reported steady membership and premium growth across the majority of its diversified business lines. Additionally, the group’s operating earnings continue to be supported by favorable margins in the Medicaid and Medicare Advantage lines of business. However, AM Best notes that margins on these lines of business likely will decline over time as these levels are not sustainable on a long-term basis.
UPMC Health Plans is owned by a financially strong integrated health care system within which the rated entities are a key component. The group plays a strategic role as the managed care affiliate of UPMC, which is formed around one of the nation’s premier academic medical centers. The ratings also take into consideration UPMC’s well-established network and overall creditworthiness, which aids in supporting the insurance operations.
The ratings of UPMC Workers’ Compensation Group reflect its balance sheet strength, which AM Best categorizes as strong, as well as its adequate operating performance, limited business profile, appropriate enterprise risk management and support provided by UPMC.
The ratings further reflect UPMC Workers’ Compensation Group’s very strong risk-adjusted capitalization, as measured by BCAR. Offsetting this positive factor is the execution risks associated with the group’s aggressive growth in the workers’ compensation segment since 2010, as well as the group’s relatively narrow product focus and geographic concentration in Pennsylvania, which exposes it to changes in local, regulatory, economic and competitive environments. The group’s planned geographic expansion over time should help to lessen this geographic concentration.
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