Offsetting these positive rating factors is VBIC’s unfavorable membership trends, which has negatively impacted premium levels over the past several years and has continued through the second quarter of 2012. However, management expects membership and premium growth in the second half of 2012 due to the company’s ongoing strategic growth initiatives, with a focus on sustainable and profitable growth trends going forward.A.M. Best believes that VBIC is well positioned at its current rating level. However, key rating factors that could lead to negative rating actions include unprofitable membership growth leading to deterioration in the company’s operating performance, a decline in its absolute and/or risk-adjusted capital levels without any support from its parent, or adverse changes to VHS’ financial condition. The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Key criteria utilized include: “Understanding BCAR for Life/Health Insurers”; “Evaluating Non-Insurance Ultimate Parents”; “Rating Members of Insurance Groups”; and “Risk Management and the Rating Process for Insurance Companies.” Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology. Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com Copyright © 2012 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.
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.