Company Website:
http://www.ambest.com
OLDWICK, N.J. -- (Business Wire)
A.M. Best has affirmed the financial strength rating of B++
(Good) and the issuer credit ratings (ICR) of “bbb” of Health Net of
California, Inc., Health Net Life Insurance Company, Health
Net Health Plan of Oregon, Inc. and Health Net of Arizona, Inc.
A.M. Best has also affirmed the ICR of “bb” and the debt rating of “bb”
on the $400 million 6.375% senior unsecured notes due 2017 of the parent
company, Health Net, Inc. (Health Net) (Woodland Hills, CA)
[NYSE:HNT]. The outlook for all ratings is stable.
The ratings affirmations for Health Net and its subsidiaries reflect the
organization’s long established and solid presence in the southern
California market, recent membership growth, adequate risk-adjusted
capitalization and the overall financial flexibility of Health Net.
Health Net has executed on a number of its business development,
geographic expansion and diversification initiatives. A.M. Best notes
that, after several years of enrollment decline, the trend reversed in
2014 through its strong participation in health exchanges and Medicaid
expansion. While Health Net’s insurance operations are largely
concentrated in California, Health Net Federal Services also provides a
number of services to the military, which includes contracts with
TRICARE and the U.S. Department of Veterans Affairs. Health Net has
historically provided financial support to help fund core insurance
operations through capital contributions. A.M. Best believes that Health
Net’s financial leverage is manageable at roughly 23% as of year-end
2014, with adequate interest coverage that is consistent within A.M.
Best’s guidelines for the current ratings.
A.M. Best expects Health Net’s growth trends to persist as a result of
continued involvement in exchanges and Medicaid programs. A.M. Best has
some concerns with this level of growth, which not only places a strain
on risk-adjusted capitalization, but could also result in unfavorable
morbidity experience. A.M. Best acknowledges the existence of
risk-mitigating programs that may temper these concerns. In addition,
the costs of participating in the exchange and other fees related to the
Patient Protection and Affordable Care Act has led to a significant
decline in earnings at some of Health Net’s core insurance subsidiaries.
Health Net set up a premium deficiency reserve adding downward pressure
on the capital balances of some of its subsidiaries. A number of capital
infusions from the holding company were made to several of its insurance
subsidiaries in an effort to ensure risk-adjusted capital levels were
maintained in 2014. A.M. Best expects that the parent company will
continue to provide capital support when necessary.
Key rating factors that could lead to a positive rating action are
profitable membership growth, overall favorable trends in operating
performance and improved risk-adjusted capitalization. Key rating
factors that could lead to a negative rating action are a decline in
risk-adjusted capital, continued lower level of earnings at the core
insurance subsidiaries, and a material increase in financial leverage or
deterioration in interest coverage at Health Net, Inc.
The methodology used in determining these ratings is Best’s Credit
Rating Methodology, which provides a comprehensive explanation of A.M.
Best’s rating process and contains the different rating criteria
employed in the rating process. Best’s Credit Rating Methodology can be
found at www.ambest.com/ratings/methodology.
Key insurance criteria reports utilized:
-
Risk Management and the Rating Process for Insurance Companies
-
Understanding BCAR for U.S. and Canadian Life/Health Insurers
-
Rating Members of Insurance Groups
-
Insurance Holding Company and Debt Ratings
-
Analyzing Insurance Holding Company Liquidity
-
A.M. Best's Liquidity Model for U.S. Life Insurers
This press release relates to rating(s) that have been published on
A.M. Best's website.For all rating information relating to the
release and pertinent disclosures, including details of the office
responsible for issuing each of the individual ratings referenced in
this release, please visit A.M. Best’s Ratings
& Criteria Center.
A.M. Best Company is the world's oldest and most authoritative
insurance rating and information source. For more information, visit www.ambest.com.
Copyright © 2015 by A.M. Best Company, Inc.ALL RIGHTS
RESERVED.
Contacts:
A.M. Best Company
David Mitchell, 908-439-2200, ext. 5556
Senior
Financial Analyst
david.mitchell@ambest.com
or
Jeffrey
Lane, 908-439-2200, ext. 5567
Managing Senior Financial
Analyst
jeffrey.lane@ambest.com
or
Christopher
Sharkey, 908-439-2200, ext. 5159
Manager, Public Relations
christopher.sharkey@ambest.com
or
Jim
Peavy, 908-439-2200, ext. 5644
Assistant Vice President,
Public Relations
james.peavy@ambest.com
Source: A.M. Best Company
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