Workers who manage assets at Eagan-based Blue Cross and Blue Shield of Minnesota look after a portfolio of investments and holdings with a value of roughly $1.6 billion.
Over the past 12 months, Blue Cross officials have decided to try leveraging this expertise by creating a business called Aware Asset Management, a federally registered investment adviser that large companies including other insurers can hire for help with managing investments.
The new business is part of a broader push for diversification at Stella, the parent company of Blue Cross that's dabbled in recent years in several ventures that go beyond the traditional health insurance business.
"We feel our need to diversify our business is probably as strong if not stronger than it has been in the past," said John Orner, president of Aware Asset Management who has been treasurer and chief investment officer at Blue Cross since 2005. "We realize that in the health insurance space, there's only so much we can do."
Among big national health insurers, the interest in diversification has featured a high-profile push toward vertical integration, where carriers increasingly are becoming clinic and pharmacy operators, too. It helps explain the insurer Aetna's merger with pharmacy giant CVS and an ongoing push at Minnetonka-based UnitedHealth Group to get into the clinic business and other types of health care services.
Vertical integration, however, is costly and requires companies to take on more debt than many Blue Cross insurers want, said Deep Banerjee of S&P Global Ratings. Developing an asset management business, by contrast, brings diversification without having to borrow money to make it happen, Banerjee said.
"This is not common in the health insurance space — [it's] a lot more common in the life insurance space," he said. "It will be interesting to see how much they can grow."
Before Blue Cross' parent company took the name Stella in 2016, it was called Aware Integrated Inc. — which helps explain the name for the new investment adviser. Aware Asset Management got started in January 2018, but Blue Cross officials spent the year building the business internally before marketing started last month.