A.M. Best Upgrades Ratings of UPMC Health Plan, Inc. and Its Affiliates

OLDWICK, N.J. --(Business Wire)--

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 volatility.

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.