A.M. Best Co. has affirmed the financial strength rating of A-
(Excellent) and issuer credit ratings of “a-” of Medco Containment
Life Insurance Company (MCLIC) (headquartered in Franklin Lakes, NJ)
and Medco Containment Insurance Company of New York (MCICNY)
(Clifton Park, NY). The outlook for all ratings is stable.
The ratings are based on MCLIC and MCICNY’s medium-term premium growth,
favorable operating results and strong capitalization. Growth in net
premiums written at the two companies has been exceptional over the past
few years, and aggregate underwriting results have been stable since
2008. Capital levels at the companies are more than adequate for their
current level of business. Capital growth had been supported in the past
by their former parent, Medco Health Solutions, Inc.; however, this
entity was acquired on April 2, 2012 by Express Scripts Holding
Company (Express Scripts) [NASDAQ: ESRX], and A.M. Best expects this
support to continue under the new ultimate parent company.
MCLIC and MCICNY have very limited product portfolios, consisting
primarily of Medicare Part D business that is offered to Medco Health
Solutions’ clients and individuals, as well as automatic enrollment of
individuals eligible for Medicare and Medicaid in various Centers for
Medicare and Medicaid Services (CMS) regions. All long-term revenues are
expected to be derived from Medicare Part D products. This narrow focus
on Medicare poses a market concentration risk. A.M. Best expects that
MCLIC and MCICNY will focus their business in support of Medco Health
Solutions’ clients under the guidance of Express Scripts.
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:
“Evaluating Non-Insurance Ultimate Parents”; “Risk Management and the
Rating Process for Insurance Companies”; “Rating Members of Insurance
Groups”; and “Understanding BCAR for Life/Health Insurers.” Best’s
Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
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