AM Best Affirms Credit Ratings of BCBSM, Inc., HMO Minnesota and MII Life Insurance Incorporated

AM Best has affirmed the Financial Strength Rating (FSR) of A- (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a-” (Excellent) of BCBSM, Inc., d/b/a Blue Cross Blue Shield of Minnesota (BCBSM), and its subsidiary, HMO Minnesota, d/b/a Blue Plus. In addition, AM Best has affirmed the Long-Term Issue Credit Rating of “bbb+” (Good) of the $250 million 3.79% senior unsecured notes due 2025 issued by BCBSM. Concurrently, AM Best has affirmed the FSR of B++ (Good) and the Long-Term ICR of “bbb+” (Good) of MII Life Insurance, Incorporated (MII Life). The outlook of these Credit Ratings (ratings) is stable. All companies are domiciled in Eagan, MN.

The ratings reflect BCBSM’s balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).

The rating affirmations are based on BCBSM’s strong risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). Capital and surplus has reported an increasing trend over the past few years as a result of profitable operating and investment performance despite annual dividend payments to the parent holding company. The organization maintains favorable financial flexibility through access to Federal Home Loan Bank advances, bank lines of credit and cash available at the parent company. BCBSM’s premium revenue has shown a good growth trend over the past two years and into 2022. The growth is attributed to rate increases and membership growth. Profitability decreased from the prior year’s results as 2020 operating income was driven largely by the receipt of risk corridor payments owed through the Affordable Care Act for prior years. During the second half of 2021, the company experienced an increase in COVID-19-related health care utilization for testing, treatment and hospitalization costs. BCBSM maintains a strong and leading market position in Minnesota, which has been maintained through brand recognition, strategic relationships with providers and a diversified product portfolio. However, the company operates in a very competitive market and has some geographic limitations to its business as a licensee of the Blue Cross Blue Shield Association.

The ratings of MII Life reflect its balance sheet strength, which AM Best assesses as adequate, as well as its adequate operating performance, limited business profile and appropriate ERM.

MI Life’s rating affirmations are based on maintenance of an adequate balance sheet strength assessment and strategic importance to BCBSM. In 2021, the company sold its consumer-directed benefits health saving account business. The sale was for all assets, liabilities and units except those related to its voluntary employees’ beneficiary association (VEBA) business and assets. The company is expected to exit the VEBA business by Dec. 31, 2022, when the remaining agreements end. After which all the remaining business will be medical stop-loss, and run out life insurance and Medicare Part D business. As a result of these transactions, AM Best considers MII Life to have a limited business profile with a concentration in stop-loss insurance as its single line of business.

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.

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