Health insurers’ credit strengthens but financial flexibility weakens

Since the beginning of the economic crisis in 2008, health insurers have looked for ways to stabilize and improve their financial standing. And their work has paid off. Since 2009, the credit profiles of companies within the industry has improved—mostly as a result of strategies that diversified cash flows and earnings.

A recent report from Moody’s, which analyzed data from 14 of the largest national health insurers, points out that, combined, the companies experienced a significant increase in EBITDA in 2010—a jump to $26.3 billion from $21.6 billion in 2009. The report does note, however, that since 2010 earnings have grown “less dramatically” and leveled off, averaging $27.4 billion for 2011 and 2012.

Additionally, the combined cash flows have increased by $4.3 billion to $13.5 billion since 2009, representing a 46% increase. The report notes that a “significant portion of the increase” is related to unregulated cash flows, which in 2012 accounted for 30%, or $4 billion, of the total cash flow.