S&P Global Ratings has revealed the US health insurance sector remains stable, despite the current COVID-19 pandemic.
The rating company explained that in 2019 US health insurers had a strong year in terms of growth, earnings and capital, adding that credit quality was stable with minimal rating actions in 2019.
Earlier this year, in January, S&P suggested that the outlook for 2020 was stable, with “clear skies ahead” for the sector.
It noted that ratings remained relatively high (median rating of 'A'), with the vast majority of insurers having a stable outlook and expects limited rating action despite the impact of COVID-19.
Deep Banerjee, S&P Global Ratings credit analyst, said: "For private insurers, including BlueCross BlueShield plans, we expect the extremely strong capital levels to offset the expected impact of this pandemic.”
"Whereas for the publicly traded insurers, product and geographic diversification, higher margins, and increased noninsurance fee-based businesses, for some, will mitigate the negative credit factors arising from lower-than-expected near-term profitability," he added.
The rating company said it has taken into account the current infection rate in the US and the potential impact of the increased hospitalisations on insurers.
"We also looked at more-severe infection rates in countries such as Italy and China and although the numbers are rising, they remain below our stress-test scenarios.”
At current levels, S&P said it expects COVID-19 to be “an earnings rather than a capital event”.
Banerjee said: "We note that there is a high degree of uncertainty about the rate of spread and the ultimate peak of the coronavirus outbreak. We will update our sector outlook if current containment efforts are unsuccessful and medical cost trends remain higher than we have expected.”
