Blue Cross Blue Shield companies suffered a 40.7% average drop in underwriting earnings last year, part of a mixed bag financially.

For the total of Blue Cross Blue Shield plans, underwriting earnings declined in total for the aggregated group of Blue Cross Blue Shield plans by 40.7%, to $2.6 billion, or $48 million, on average. This drop in earnings was substantially more than the 6.0% decrease in 2008, according to an analysis by A.M. Best Co.

The ratings service found that during 2009 Blue Cross Blue Shield companies were challenged by a decline in underwriting earnings from upticks in the health care expense and the sales, general & administrative (SG&A) expense ratios and by lower premiums due to the recession.

Investment income also declined because interest rates remained low. The turnaround in the financial markets resulted in realized and unrealized gains in 2009, compared with losses the prior year.

Overall, net income improved mostly due to realized gains rather than investment or underwriting income. Total capital & surplus (C&S) also grew largely due to unrealized gains on investments.

There was a 70 bps increase in the health care expense ratio for the aggregated group in 2009, from 85.9% to 86.6%, according to the analysis. Meanwhile, the SG&A expense ratio for the aggregated group in 2009 had a 50 bps increase to 11.3%.

Net premiums written grew by 2.7% in 2009 to $153.4 billion. The low rate of growth in 2009 versus 6.9% in 2008 reflects rate increases offset by the impact of membership losses and benefit buydowns in the commercial sector, according to A.M. Best.

A 7.8% decrease in investment income, to $44 million, on average occurred, due to the low interest rate environment.