AM Best has assigned a Financial Strength Rating of A (Excellent) and a Long-Term Issuer Credit Rating of “a” (Excellent) to CVS Caremark Indemnity Ltd. (CVS Caremark Indemnity) (Bermuda). The outlook assigned to these Credit Ratings (ratings) is stable.

The ratings reflect CVS Caremark Indemnity’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).

CVS Caremark Indemnity whose parent company is CVS Health Corporation (CVS Health), assumes Medicare Part D business from an affiliated insurance company, SilverScript Insurance Company (SilverScript) under a quota share agreement and writes liability coverage, workers’ compensation and other property/casualty cover for affiliates within the CVS Health organization.

CVS Caremark Indemnity’s very strong balance sheet strength assessment is supported by the strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR) model, which is driven by its favorable level of capital and surplus. Additionally, CVS Caremark Indemnity has adequate liquidity ratios and has reported positive cash flows from operations in each of the last three years. CVS Caremark Indemnity currently does not use a line of credit or a credit facility.

CVS Caremark Indemnity’s adequate operating performance reflects consistent earnings on an operating and net basis. Underwriting income is primarily driven by its quota share reinsurance agreement with SilverScript for its Medicare Part D business, which comprises approximately two-thirds of net premium written. Net investment income has also been a consistent contributor to overall earnings.

AM Best assesses CVS Caremark Indemnity’s business profile as neutral. This is driven by CVS Caremark Indemnity’s concentration in its reinsurance assumed business, which is offset by geographic diversification. In addition, all business written and assumed by CVS Caremark Indemnity is derived from CVS Health entities.

CVS Caremark Indemnity is incorporated into the larger CVS Health Corporation ERM program, which AM Best assesses as appropriate. The ERM program coordinates a holistic risk management process that emphasizes collaboration and information sharing among business functions to identify and collectively respond to the organization’s full range of risks.

AM Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated in the United States and throughout the world. For current Best’s Credit Ratings and independent data on the captive and alternative risk transfer insurance market, please visit www.ambest.com/captive.

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