A.M. Best Co. has upgraded the financial strength rating to A-
(Excellent) from B++ (Good) and issuer credit ratings to "a-" from
"bbb+" of UPMC Health Plan, Inc. and its affiliates, UPMC
Health Network, Inc., UPMC For You, Inc., UPMC Health Benefits,
Inc. and Community Care Behavioral Health (CCBH). The outlook
has been revised to stable from positive. Collectively, the group is
herein referred to as UPMC Health Plans. All companies are headquartered
in Pittsburgh, PA.
The upgrading of the ratings of UPMC Health Plans reflect its strategic
role as the managed care affiliate of the University of Pittsburgh
Medical Center (UPMC), a fully integrated health care delivery
system, which is formed around one of the nation's premier academic
medical centers. The ratings also take into consideration UPMC's
creditworthiness and access to its well-established network, which
enhances each entity's stand-alone assessment.
The ratings also reflect UPMC Health Plans' strong membership and
premium growth across its diversified business lines over the last
several years, as well as its continued favorable underwriting gains and
consolidated earnings trends. Additionally, UPMC Health Plans has the
explicit financial support of UPMC through capital contributions, which
primarily have come in the form of surplus notes. The organization
recently improved the uality of its capital structure by converting its
shorter-term notes to longer term, 20-year surplus notes, which A.M.
Best views as a more permanent form of capital. A.M. Best will continue
to monitor the use of these surplus notes and the need for additional
capital contributions going forward, with the expectation that more
capital will be added by UPMC when and if necessary to support UPMC
Health Plans' growth, facilitate expansion efforts and mitigate earnings
A.M. Best remains somewhat concerned about the organization's
stand-alone risk-adjusted capital levels within certain affiliates,
particularly at UPMC Health Plan, Inc. and the considerable use of
surplus notes at UPMC Health Benefits, Inc. A.M. Best will continue to
have discussions with UPMC's management about plans to further improve
capitalization within these entities. Additionally, UPMC Health Plans
has experienced some margin compression, and as such, management has
implemented strategic initiatives to maintain profitability in the near
future. Due to these initiatives, A.M. Best expects the organization to
return to its historic levels of profitability and maintain a steady
premium growth trend across its various business lines and in each of
its regulated entities.
UPMC's insurance entities are well positioned for their current ratings.
Key rating drivers that could lead to negative rating actions include
deterioration in operating performance and/or capitalization, as well as
lack of financial support from the parent organization. A.M. Best will
continue to monitor the explicit and implicit support received by UPMC
Health Plans from UPMC in the future.
The methodology used in determining these ratings is Best's Credit
Rating Methodology, which provides a comprehensive explanation of A.M.
Best's rating process and contains the different rating criteria
employed in the rating process. Best's Credit Rating Methodology can be
found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is the world's oldest and most
authoritative insurance rating and information source. For more
information, visit www.ambest.com.
Copyright © 2013 by A.M. Best Company, Inc. ALL RIGHTS
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