AM Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “a” (Excellent) of Blue Cross Blue Shield of Michigan Mutual Insurance Company (Detroit, MI) and Blue Care Network of Michigan (Southfield, MI) (collectively known as BCBS MI). In addition, AM Best has affirmed the FSR of A (Excellent) and the Long-Term ICRs of “a” (Excellent) of AF Group’s members. (See below for a detailed list of the companies.) The outlook of these Credit Ratings (ratings) is stable.

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

The negative outlooks on BCBS MI’s ratings reflect sharp deterioration in underwriting income and net operating income that began the a few years ago and has worsened in the first nine months of 2024. The decline in underwriting performance was driven by higher claims utilization across all lines of businesses, including the commercial group and government programs, to levels higher than those before the pandemic. The losses were largely driven by significantly higher utilization levels driven by pent-up demands for surgeries, other health care services and high demand for GLP-1 medications and auto immune therapies medications. In addition, the government program lines of business have reported several years of sizeable losses in the Medicare Advantage business due to risk-adjustment shortfalls, increased benefit costs and worsening claims experience and acuity in Medicaid line, as well as following redeterminations. These unfavorable operating losses are expected to continue into 2025 as trends surrounding medical and pharmaceutical costs will result in rate increases lagging what is adequate. BCBS MI has taken numerous significant steps to improve its underwriting performance. Furthermore, the group has made significant investments in its systems and to right-size its workforce to reduce administrative costs and is making additional corrective actions on the benefit side to improve operating earnings going forward. However, the group’s risk-adjusted capital, as measured by Best’s Capital Adequacy Ratio (BCAR), has deteriorated due to the recent losses, and AM Best is concerned that any further losses beyond expectations may place additional pressure on the current level of capitalization.

The ratings of BCBS MI also reflect its leading position in Michigan as one of the state’s largest health insurers. The organization possesses strong brand recognition and continues to maintain strategic relationships with a diverse group of providers. BCBS MI and its partnerships have continued to demonstrate premium growth across most lines of business. BCBS MI’s vast array of products and services enables it to compete effectively in the health insurance market in Michigan. Furthermore, BCBS MI continues to maintain solid levels of investment income and has improved earnings through 2024.

The ratings of AF Group reflects its balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, neutral business profile and appropriate ERM.

AF Group continues to maintain the strongest level of risk-adjusted capitalization, as measured by BCAR. The group has generated organic surplus growth driven by earnings, partially offset by modest dividends to the parent. Its strong operating performance has been supported through consistent underwriting gains and solid investment income.

The FSR of A (Excellent) and the Long-Term ICRs of “a” (Excellent) have been affirmed with stable outlooks for the following members of AF Group:

• United Wisconsin Insurance Company
• CompWest Insurance Company
• Accident Fund Insurance Company of America
• Third Coast Insurance Company
• Accident Fund National Insurance Company
• Accident Fund General Insurance Company

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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