Market Overview

A.M. Best Removes From Under Review With Negative Implications and Affirms Credit Ratings of SilverScript Insurance Company


A.M. Best has removed from under review with negative
implications and affirmed the Financial Strength Rating of A (Excellent)
and the Long-Term Issuer Credit Rating of "a" of SilverScript Insurance
Company (SilverScript) (Nashville, TN). The outlook assigned to these
Credit Ratings (ratings) is stable.

The ratings reflect SilverScript's balance sheet strength, which A.M.
Best categorizes as very strong, as well as its strong operating
performance, neutral business profile and appropriate enterprise risk

The ratings also reflect SilverScript's very strong risk-adjusted
capital levels over the past several years, supported by 100% retention
of net income and an absence of dividends. Capital and surplus has shown
consistent growth, with a five-year compound annual growth rate of 28%.
These positive balance sheet attributes are partially offset by
potential liquidity concerns resulting from a high dependency on large
program receivable balances, due to the Centers for Medicare & Medicaid
Services (CMS) reconciliation process and timing of payments.
SilverScript's ceded reinsurance agreements, and if necessary, the
support from its ultimate parent, CVS Health Corporation (CVS Health),
partially mitigates the feasible risk of a delay in payment from CMS.
However, the ability of the ultimate parent to provide may be pressured
as CVS Health recently increased its financial leverage to over 60%
following the debt issuance to pre-fund the pending acquisition of
Aetna, Inc. (Aetna). In addition, there is significant integration risk
related to the Aetna acquisition given the vertical nature of the
transaction and potential complexity to achieve meaningful synergies.
However, CVS Health stated its intention to maintain the current
capitalization level at SilverScript and accelerate de-leveraging
through robust cash flow and reduced share repurchases. Following the
announcement of the transaction, CVS Health stopped share repurchases,
starting in 2018. CVS Health's share repurchases totaled $4.4 billion in

SilverScript has demonstrated a long-term trend of strong favorable
earnings, with a five-year return on equity exceeding 20%. SilverScript
is the market leader in stand-alone prescription drug plan enrollment;
however, more than 50% of membership is composed of low-income
subsidized members auto-assigned by CMS. Such concentration creates lack
of product diversification and subjects SilverScript to high degree of
regulatory risks.

This press release relates to Credit Ratings that have been published
on A.M. 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 A.M. Best's
Rating Activity
web page. For additional information
regarding the use and limitations of Credit Rating opinions, please view
Best's Credit Ratings
. For information on the proper media
use of Best's Credit Ratings and A.M. Best press releases, please view
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