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Fitch Downgrades Health Insurance Plan of Greater New York To 'BB+'; Withdraws Rating

Fitch Ratings has downgraded Health Insurance Plan of Greater New York's (HIP) Insurer Financial Strength rating to 'BB+' from 'BBB-'. The Rating Outlook is Stable. Concurrent with today's rating action, Fitch has withdrawn the rating for commercial reasons.

KEY RATING DRIVERS

The rating downgrade primarily reflects HIP's and its subsidiary's Group Health Inc.'s (GHI) poor 2014 and first quarter 2015 financial results and corresponding losses in capital and surplus that were materially outside Fitch's ratings expectations.

Group Rating Methodology Applied: HIP's rating reflects use of a group rating methodology that considers the operational and financial aspects of HIP's subsidiaries including Group Health Options, Inc. (GHI). Fitch believes that a group rating methodology is appropriate due to GHI's role in rounding out the organization's product portfolio, financial support provided that HIP has historically provided to GHI, overlapping management between the two companies, and the companies' rights to elect an equal number of EmblemHealth Inc.'s, (Emblem) HIP's parent company, board members.

Financial Performance and Earnings: HIP and GHI combined reported a net loss of $40 million (statutory accounting basis) in the first quarter 2015 after reporting a combined net loss of $494 million in 2014. In contrast, from 2010 through 2013 HIP and GHI generated a combined net profit each year and the companies' combined net income averaged $152 million. The 2014 combined net losses were spread across products as the companies reported underwriting losses in the comprehensive (hospital and medical), Medicare and Medicaid business lines.

Capitalization and Leverage: Reflecting the above referenced losses, HIP's capital and surplus at March 31, 2015 totaled $810 million compared with $928 million at year-end 2014 and $1.4 billion at year-end 2013. GHI reported similarly dramatic declines in capital and surplus. At March 31, 2015, the company reported $124 million of capital and surplus compared with $127 million at year-end 2014 and $276 million at year-end 2013. Fitch estimates the companies' combined NAIC ratio at year-end 2014 at 190% compared with 260% at year-end 2013.

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Medical, Healthcare, Expatriate And Travel Insurance

A guide to leading international medical, healthcare, expatriate and travel insurance underwriters, companies, providers, operating within leisure, expatriate and corporate travel business markets, globally.

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