TEXT-Fitch publishes credit overview on Blue Cross Blue Shield Cos

Thu Feb 28, 2013 11:26am EST

Feb 28 - 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 environment 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

Insurance Rating Methodology - Amended
Health Insurance and Managed Care (U.S.)
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