A.M. Best has downgraded the Financial Strength Rating to B++ (Good) from A- (Excellent) and the Long-Term Issuer Credit rating to "bbb" from "a-" of Mountain States Healthcare Reciprocal Risk Retention Group (Billings, Montana). The outlook of the Credit Ratings has been revised to negative from stable.
The rating downgrades are the result of deterioration in the company's risk-adjusted capitalization and operating performance in 2016, following significant adverse loss reserve development on prior accident years, primarily 2015 and 2012. As a result, policyholder surplus declined 31.6 percent at year-end 2016. The rating actions further reflect the challenges faced by Mountain States Healthcare to return underwriting results back to profitable levels, despite corrective actions, which include select rate increases and increasing reserve levels on older accident years for conservatism. In addition, A.M. Best is concerned with the possibility of additional deterioration in risk-adjusted capitalization if operating performance does not improve in 2017, and the company continues with its required payments of subscriber savings accounts to departed members, as indicated to A.M. Best.