Highmark Inc.

The stable outlook on Highmark reflects our expectation that it will sustain its leading market positions and profitability in line with similarly rated peers. We forecast adjusted EBIT ROR of about 2% in 2020-2021, with capital remaining redundant at the 'AAA' level, financial leverage of 25%, and EBITDA fixed-charge coverage of roughly 8x-10x. We could lower our ratings by one notch in the next 12-24 months if the company is unable to consistently meet our operating performance expectations with EBIT ROR in the low-single digits, or if financial leverage rises above 40%. A moderate decline in operating performance in the next couple of years may indicate Highmark is unable to sustain traction with its strategic initiatives for its AHN segment.

...The Pittsburgh, Pa.-based plan is the fourth-largest BCBS plan in its markets. At year-end 2019, Highmark Inc. (Highmark Health Plan) covered more than 4 million members in Pennsylvania (PA), Delaware (DE), and West Virginia (WV). After the recently announced affiliation with HealthNow New York Inc., Highmark will add additional 670,000 members to its platform and will extend its geographic reach to Western New York (approval pending). Highmark maintains a strong competitive position reflecting its leading market share in its core insurance markets; extremely strong capitalization; and moderately conservative financial leverage. Its competitive position also reflects its extensive provider networks, a growing value-based network that includes affiliate AHN, local market expertise, good product diversification in commercial and government-sponsored health plans, and good earnings from its diversified business segment. Its divisions include the health plan, United Concordia Dental (UCD) dental...

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