The ratings reflect Blue Cross’ persistent favorable operating performance with expense ratios over the past five years that were lower than those of its peers, as well as its strong risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR). The ratings also account for Blue Cross’ continual efforts to diversify its distribution channels to more cost-effective direct and online channels.

Offsetting rating factors include the competitive group medical insurance market environment, which poses challenges to the balance between adequate pricing and business growth. In addition, financial market volatility could negatively impact Blue Cross’ capital and surplus through revaluation of investment reserve on available-for-sale assets.

Positive rating actions for Blue Cross are unlikely in the near term. Negative rating actions could occur if the company’s risk-adjusted capitalization continues to weaken, or if a deteriorating trend in underwriting profitability emerges.

Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.

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