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Provider-owned and affiliated managed care companies continue to maintain conservative invested asset portfolios, according to a special report by the A.M. Best Co. The majority of these companies’ invested assets were in cash and short-term investments during 2005. Of the 109 companies included in the study, the average allocation to this investment class was 46%. Asset allocations to fixed-income securities averaged 36%, while common stocks (affiliated and unaffiliated) averaged 10% of total invested assets. The remaining average asset allocations were 6% in real estate and 2% in Schedule BA Assets. A.M. Best expects this investment conservatism, given the short-tailed nature of health claim liabilities, and does not anticipate any significant shifts among asset classes for this segment during the medium term. However, A.M. Best believes health-care systems with strong creditworthiness at both the system and health plan levels could allocate modest amounts of excess capital at a health plan from conservative investments to higher-risk, higher-yielding assets to offset the underwriting impact from pricing competition. A.M. Best would view a measured asset shift favorably for the stronger credits with excess capital measured using Best’s Capital Adequacy Ratio (BCAR), but negatively for weaker credits with lower BCAR scores that could sacrifice needed liquidity to seek higher-risk returns. BestWeek subscribers can download a PDF copy of all full special reports at no additional cost or a combination of the PDF copies plus all related spreadsheet files of the report data at no additional cost from our Web site at www.bestweek.com. Nonsubscribers can download a PDF copy of the full special report (8 pages) for $55 or a combination of the PDF copy plus the spreadsheet file of the report data for $140 from our Web site at www.bestweek.com. A.M. Best Co., established in 1899, is the world’s oldest and most authoritative insurance rating and information source.
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For more information, visit A.M. Best’s Web site at www.ambest.com.
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