AM Best Downgrades Credit Ratings of Blue Cross and Blue Shield of Vermont and Its Subsidiary; Places Credit Ratings Under Review with Negative Implications

AM Best has downgraded the Financial Strength Rating (FSR) to B (Fair) from B++ (Good) and the Long-Term Issuer Credit Ratings (Long-Term ICRs) to “bb” (Fair) from “bbb+” (Good) of Blue Cross and Blue Shield of Vermont (BCBSVT) and its subsidiary, The Vermont Health Plan, LLC., collectively known as Blue Cross and Blue Shield of VT Group (BCBSVT Group). Additionally, AM Best has placed the FSR and the Long-Term ICRs under review with negative implications. Both companies are domiciled in Berlin, VT.

These Credit Ratings (ratings) reflect BCBSVT Group’s balance sheet strength, which AM Best assesses as adequate, as well as its marginal operating performance, neutral business profile and marginal enterprise risk management.

The downgrading of the ratings is attributed to a significant decline in the level of risk-adjusted capitalization as measured by Best’s Capital Adequacy Ratio (BCAR) through year-end 2023, with further substantial deterioration expected through mid-2024. The projected year-end BCAR for 2024 has deteriorated to a weak assessment. The decline for 2024 is being driven by a higher-than-projected net loss driven by continuing higher-than-expected costs and utilization trends throughout the second quarter, as well as several other one-time items. The previous capital and surplus decline in 2023 was primarily due to BCBSVT’s higher unrealized capital loss position. AM Best expects that the continuation of underwriting and net losses could impact the remainder of 2024, although the company is seeking sizable rate increases as part of its corrective action plan. Additionally, BCBSVT is currently evaluating potential options for capital support to bolster its risk-adjusted capital for 2024.

The placement of the ratings under review with negative implications reflects AM Best’s concerns about the uncertainty regarding the extent of the improvement in BCBSVT’s risk-adjusted capitalization, materially higher-than-expected net losses projected at year-end 2024 and limited financial flexibility. The ratings will remain under review while AM Best has further discussions with management and monitors the status of the organization’s operating performance and balance sheet strength position as it implements corrective measures through the second half of 2024.

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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