AM Best Affirms Credit Ratings of Highmark Inc. and Its Subsidiaries

AM Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICRs) of “a+” (Excellent) of Highmark Inc. (Highmark) (Headquartered in Pittsburgh, PA) and its life/health (L/H) subsidiaries, collectively known as Highmark Inc. Group. Concurrently, AM Best has affirmed the FSR of A (Excellent) and the Long-Term ICRs of “a+” (Excellent) of Highmark’s dental subsidiaries, which operate under the United Concordia brand name. Lastly, AM Best has affirmed the Long-Term Issue Credit Rating (Long-Term IR) of “a” (Excellent) of Highmark’s existing senior unsecured notes. The outlook of these Credit Ratings (ratings) is stable. (See below for a detailed listing of the companies and the Long-Term IR).

The ratings of Highmark reflect its balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, favorable business profile and appropriate enterprise risk management (ERM).

Highmark Inc. Group continues to maintain the strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), which has remained consistent in recent years. Highmark maintains a diversified and liquid investment portfolio held predominantly in investment-grade fixed-income securities and short-term investments. The insurance entities have a good level of financial flexibility and moderate financial leverage despite its senior notes and high revolver utilization in each of the past three years, including 2024. AM Best notes that Highmark completes scenario stress testing and economic capital modeling to manage capital deployment throughout the organization.

Highmark, Inc. Group was profitable through 2023, and earnings levels have improved notably through mid-2024. The group has reported generally favorable premium growth and underwriting income despite large, realized investment losses over the past two years. While premiums have increased year over year, Highmark has entered into a new quota share reinsurance agreement, which was effective January 2024. The emergence of this reinsurance arrangement shows a decline in premiums on a net basis while gross premiums pre-reinsurance continues their upward trajectory despite Medicaid redeterminations. Management expects other opportunities, including Southeastern Pennsylvania (SEPA) expansion and West Virginia’s Medicaid enrollment, as well as expected Medicare Advantage growth.

Operating and net results have shown considerable volatility over the past five-year period, due to a combination of factors, including downside equity market/investment volatility in 2022, including mergers and acquisitions activity in 2021 (HealthNow affiliation and Gateway Health Plan, Inc. acquisition). The earnings improvement in 2023 has continued through mid-2024, driven by improvements across most of its core businesses. Operating results may moderate over the near term as a result of industrywide challenges following Medicaid redeterminations, but results are expected to remain positive. Highmark remains a top five Blue Cross Blue Shield plan in the United States across a range of key financial metrics, offering health products and services across four states. Highmark Inc. Group has good business diversification through its national medical stop-loss business, national dental operations, and technology platform services in addition to its core health insurance business. Highmark Inc. Group also is part of an integrated delivery system with its affiliate, Allegheny Health Network, in its Western Pennsylvania service area, offering coordinated, high-quality and cost-effective care and health insurance products. The Highmark organization also has a well-developed and comprehensive ERM program, which is incorporated into business operations and strategic planning.

Highmark’s parent, Highmark Health, is a diversified organization comprised of the insurance operations under Highmark and Allegheny Health Network, a large provider system in Western Pennsylvania. The Highmark Health organization generated over $27 billion in revenue in 2023, with the majority of that derived from the insurance operations.

The ratings of United Concordia reflect its balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile, appropriate ERM and strategic importance to its parent, Highmark Inc.

United Concordia’s risk-adjusted capitalization increased for the fifth consecutive year and is assessed strongest, as measured by BCAR. Earnings have driven the improved risk-adjusted capitalization, despite dividends to its parent. United Concordia’s earnings have trended down, but lower dividends were paid resulting in capital accumulation year over year. Underwriting income has been favorable over the past few years, driven in part by the company’s government contracts, including the Federal Employees Dental and Vision Insurance Program and TRICARE Dental Plan. Membership has shifted toward administrative service arrangements resulting in flattening premium growth, while total revenues remain strong. However, dental utilization has continued its rising trends and while results are expected to remain favorable over the near term, they will be at reduced levels. United Concordia has a large membership base, with more than ten million individuals, and a large national dental network with more than 130,000 dentists. The company also benefits from the developed ERM program of the larger Highmark organization. United Concordia is strategically important to its parent, Highmark Inc. as it provides both product and geographic diversification to the organization.

AM Best has affirmed the FSR of A (Excellent) and the Long-Term ICRs of “a+” (Excellent) with stable outlooks, for Highmark Inc. Group and its following L/H subsidiaries:

• HM Health Insurance Company
• HM Life Insurance Company
• HM Life Insurance Company of New York
• Highmark Choice Company
• Highmark West Virginia Inc.
• Bridge City Insurance Company

AM Best has affirmed the FSR of A (Excellent) and the Long-Term ICRs of “a+” (Excellent) with stable outlooks for the following dental subsidiaries of Highmark Inc. Group:

• United Concordia Companies, Inc.
• United Concordia Insurance Company
• United Concordia Insurance Company of New York
• United Concordia Dental Plans of California, Inc.
• United Concordia Dental Plans of Pennsylvania, Inc.
• United Concordia Dental Plans, Inc.

The following Long-Term IR has been affirmed with a stable outlook:

Highmark Inc. —

-- “a” (Excellent) on $250 million 6.125% senior unsecured notes, due 2041

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.

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