AM Best has assigned a Financial Strength Rating of A- (Excellent) and a Long-Term Issuer Credit Rating of “a-” (Excellent) to CareSource Reinsurance LLC (CareSource Re) (Helena, MT). The outlook assigned to these Credit Ratings (ratings) is stable.

The ratings reflect CareSource Re’s balance sheet strength, which AM Best assesses as strongest, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).

CareSource Re is a captive subsidiary of CareSource, a not-for-profit managed care company headquartered in Dayton, OH. CareSource Re was created in 2012 to provide medical stop-loss reinsurance for affiliated health plans. Under the reinsurance agreement, CareSource Re serves as a direct reinsurer to PartnerRe, who provides reinsurance coverage to the affiliated health plans of CareSource Re and cedes a portion of the risk to the captive company. CareSource is one of the largest Medicaid managed care organizations in the nation. The company offers Medicaid, Medicare and Individual Marketplace products across its numerous affiliated health plans and has approximately two million members. AM Best assesses CareSource Re’s business profile as limited given its concentrated business production.

CareSource Re’s balance sheet strength is underpinned by its risk-adjusted capitalization, which is at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). The company has consistently reported solid levels of capital over the last few years with growth driven by retained earnings, offset by dividends to the parent. Invested assets are very liquid and conservative, held mostly in fixed income securities, as well as cash and short-term. The ratings also reflect the financial flexibility and strong liquidity position of CareSource.

CareSource Re has reported a positive, albeit fluctuating, operating performance with a five-year average return on equity of close to 58%. Volatility in operating results are expected to be impacted by claims volume and severity. However, operating profitability is expected to remain favorable over the medium to long term.

CareSource Re’s ERM is managed at the ultimate parent level, but it has local functionality as well. The ERM program is well-established and is coordinated at the corporate level. The company’s ERM is considered appropriate for its risk profile. Risk identification and reporting are completed on a regular basis, and ERM is incorporated into the corporate strategic planning. There is established oversight and monitoring of the ERM program.

AM Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated in the United States and throughout the world. For current Best’s Credit Ratings and independent data on the captive and alternative risk transfer insurance market, please visit www.ambest.com/captive.

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