CHICAGO--(BUSINESS WIRE)--

Fitch Ratings has affirmed Health Care Service Corporation's (HCSC) Insurer Financial Strength Rating (IFS) at 'A+', its long-term Issuer Default Rating (IDR) at 'A', and the 'A' rating on the company's $500 million issue of 4.70% senior unsecured notes due Jan. 15, 2021. The Rating Outlooks are Stable

KEY RATING DRIVERS

HCSC's strong competitive position, conservatively structured balance sheet strength and solid earnings profile all support the current ratings. Balanced against these strengths is HCSC's concentration in its two key markets of Illinois and Texas.

On July 31, 2013, HCSC completed its acquisition of Blue Cross & Blue Shield of Montana's insurance assets and operations. BCBS Montana will become one of HCSC's five BCBS operating divisions. BCBS Montana has 250,000 customers.

HCSC is a leading provider of health insurance and managed care services in Illinois, Texas, New Mexico, and Oklahoma. It is the nation's largest nonpublic health insurer with greater than 13.5 million members.

A key competitive advantage is the company's exclusive right to use Blue Cross and Blue Shield (Blues) trademarks in HCSC's four core states. In addition, access to Blue Card, the Blue Cross Blue Shield Association's (BCBSA) national account platform, has helped establish and grow HCSC's leading market position.

HCSC has a conservative balance sheet measured by strong statutory capitalization, modest financial leverage and a high quality, liquid investment portfolio. HCSC's NAIC RBC ratio was 620% of the company action level (CAL) at year-end 2012. Surplus increased by nearly 7% or $656 million to $10.2 billion through the first half of 2013.

Debt to total capital as of June 30, 2013 was 4.8%, which Fitch considers very modest for both the current rating category and the entire market sector. The company has $500 million in senior unsecured debt with 4.7% coupon maturing in January 2021.

HCSC's annualized return on capital was considered strong at 11.8% through the first six months of 2013, especially in light of its conservative capital position. HCSC's EBITDA margin was 8.2% through June 30, 2013, which is consistent with Fitch's median guideline for the current rating category.

Link:

Fitch Affirms Health Care Service Corporation Ratings