Blue Cross Blue Shield companies saw their share of hardships in 2009. According to A.M. Best, the companies experienced a decline in underwriting earnings from upticks in the health care expense and the sales, general & administrative (SG&A) expense ratios as well as by lower premiums due to the recession. Investment income also declined due to continuously low interest rates.

However, there were a few good results. The turnaround in the financial markets resulted in realized and unrealized gains in 2009, compared with losses the prior year. Overall, net income improved mostly due to realized gains rather than investment or underwriting income. Total capital & surplus (C&S) also grew largely due to unrealized gains on investments.

A.M. Best released other findings from its study:

• Underwriting earnings declined in total for the aggregated group of Blue Cross Blue Shield plans by 40.7% to $2.6 billion, or $48 million on average. This drop in earnings was substantially more than the 6% decrease in 2008.

• There was a 70-bps increase in the health care expense ratio for the aggregated group in 2009 from 85.9% to 86.6%

• The SG&A expense ratio for the aggregated group in 2009 had a 50-bps increase to 11.3%

• Net premiums written grew by 2.7% in 2009 to $153.4 billion. The low rate of growth in 2009 versus 6.9% in 2008 reflects rate increases offset by the impact of membership losses and benefit buydowns in the commercial sector.

• There was a 7.8% decrease in investment income to $44 million on average due to the low interest rate environment

• C&S grew by 10.9% in 2009 to $46.3 billion in aggregate, and was attributable to improved net income and unrealized gains

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