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A.M. Best Upgrades Ratings Of Valley Baptist Insurance Company

A.M. Best Co. has upgraded the financial strength rating to B+ (Good) from B (Fair) and issuer credit rating to “bbb-” from “bb” of Valley Baptist Insurance Company (VBIC) (Harlingen, TX). Both ratings have been removed from under review with positive implications and assigned a stable outlook.

The upgrades reflect VBIC’s strengthened capitalization as a result of its acquisition by its new majority owner, Vanguard Health System (VHS) [NYSE: VHS], as well as VBIC’s favorable operating performance reported through year-end 2011 and the first half of 2012 after several years of reporting losses.

The majority of VBIC was acquired by Vanguard Health Financial Company, a downstream subsidiary of VHS in the fall of 2011. Subsequent to the acquisition, VHS continues to show support to VBIC, emphasizing the strategic role of the insurance company to the health system. VBIC has experienced significant improvement in its absolute and risk-adjusted capitalizations, as measured by Best’s Capital Adequacy Ratio (BCAR) at year-end 2011 and its risk-adjusted capital is projected to be further strengthened by year-end 2012. The company has benefited from explicit capital support in the form of contributions largely from VHS, and its balance sheet strength is further supported by an unconditional guarantee from VHS of all VBIC’s liabilities. VHS has demonstrated explicit financial support through capital contributions, thereby bolstering VBIC’s capital levels significantly since the acquisition.

Additionally, VBIC has been able to maintain favorable operating results through the first half of 2012, building on its positive year-end operating results. These positive trends are partially driven by its new relationship and operating efficiencies with VHS’ health care network, as well as numerous other corrective measures implemented by the management team. A.M. Best expects VBIC to maintain stable operating results through positive earnings and organic capital growth in the near future.

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