AM Best Removes From Under Review With Negative Implications and Affirms Credit Ratings of MII Life Insurance, Incorporated

AM Best has removed from under review with negative implications and affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of "bbb+" (Good) of MII Life Insurance, Incorporated (MII Life) (Eagan, MN). The outlook assigned to these Credit Ratings (ratings) is stable.

The ratings reflect MII Life's balance sheet strength, which AM Best assesses as adequate, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management. In addition, MII Life benefits from rating enhancement from its affiliate, BCBSM, Inc., d/b/a Blue Cross Blue Shield of Minnesota (BCBSM), the lead entity of Aware Integrated, Inc. (Aware).

The ratings of MII Life were placed under review with negative implications in April 2021, following an announcement that HealthEquity, Inc. HQY had entered into an agreement to acquire Further, MII Life's branded health savings account business, for $500 million; this caused uncertainty over impact to risk-adjusted capitalization and MII Life's eligibility to continue receiving rating enhancement. Although MII Life has divested the health savings account, its largest operations, they have retained its employer-funded Voluntary Employees' Beneficiary Association (VEBA) trust administration business. As a result of the divestiture, investment risk declined substantially, which improved risk-adjusted capitalization materially. MII Life also discontinued offering Medicare Part D in 2021, which decreased underwriting risk. Therefore, MII Life improved its risk-adjusted capitalization, as measured by Best's Capital Adequacy Ratio (BCAR), to an assessed level of strongest, which underpins its balance sheet strength assessment. In addition, capital adequacy is likely to increase over the near term as the company is expecting to discontinue its VEBA business, which will decrease capital requirements further.

The company is being maintained as a subsidiary of Aware and an affiliate of BCBSM. MII Life continues to cedes 100% of risk for its medical stop-loss insurance to BCBSM. As a result, AM Best continues to afford rating enhancement to MII Life in respect of its ultimate ownership by and the implicit support from BCBSM. Although MII Life's operations account for a small amount of overall revenues and earnings, AM Best views the company as being strategically important to the organization.

MII Life's underwriting performance is expected to remain favorable, supported by runoff of its operations and one-time gains from the transaction. In addition, AM Best considers MII Life to have a limited business profile with a concentration in just one line of business—stop-loss insurance. AM Best considers the company's ERM approach as appropriate given the size and complexity of its current operations. Going forward, AM Best expects MII Life to benefit from the BCBSM's expertise in areas of risk selection and reserving, as well as its oversight and support in respect of risk management.

This press release relates to Credit Ratings that have been published on AM Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best's Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best's Credit Ratings, Best's Performance Assessments, Best's Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best's Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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