|[November 01, 2013]
A.M. Best Affirms Ratings of Universal American Corp. and Most of Its Subsidiaries
OLDWICK, N.J. --(Business Wire)--
A.M. Best Co. has affirmed the issuer credit rating (ICR) of "bb"
of Universal American Corp. (Universal American) (White Plains,
Concurrently, A.M. Best has affirmed the financial strength rating (FSR)
of B++ (Good) and ICRs of "bbb" of American Progressive Life & Health
Insurance Company of New York (American Progressive) (White Plains,
NY) and The Pyramid Life Insurance Company (Pyramid Life)
(Overland Park, KS).
A.M. Best has also affirmed the FSR of B+ (Good) and ICRs of "bbb-" of American
Pioneer Life Insurance Company (American Pioneer) (Lake Mary,
FL), Constitution Life Insurance Company (Constitution Life), Marquette
National Life Insurance Company (Marquette National), Union
Bankers Insurance Company (Union Bankers) and SelectCare of
Texas, Inc. (SelectCare). The outlook for SelectCare's ratings has
been revised to stable from positive.
Additionally, A.M. Best has upgraded the FSR to B+ (Good) from B (Fair)
and ICR to "bbb-" from "bb+" of Today's Options of Oklahoma, Inc. (Today's
Options) (Oklahoma City, OK). Unless otherwise specified, the outlook
for all ratings is stable. The insurance companies mentioned above are
subsidiaries of Universal American and are domiciled in Houston, TX,
unless otherwise specified.
The affirmation for Universal American and its subsidiaries on a
consolidated basis reflects recent stabilization of premium revenue
levels, generally favorable underwriting results, low financial leverage
and good liquidity. Although Universal American's premium revenue level
is materially lower than historic levels due to multiple factors (the
company is now focused on Medicare Advantage business in core markets),
moderate growth in these markets is being seen. Overall underwriting
results for the company have remained favorable over the last three
years, although margins have declined. Net losses through June 30, 2013
were mainly driven by a goodwill impairment related to the acquisition
of APS Healthcare. Additionally, Universal American's debt-to-capital
ratio was 15.% at June 30, 2013, which is considered low as compared to
its peers. Universal American has a good level of liquidity from parent
company cash, dividends from subsidiaries as well as an untapped $75
million revolving credit agreement.
Offsetting rating factors include Universal American's reduced level of
premium revenue, increased business concentration risk and significant
dividends taken from insurance subsidiaries. The company's premium
revenue has declined significantly over the last two years mainly due to
the sale of its Medicare Part D business, a decline in Medicare
Advantage new sales and retention in 2012, as well as the company's
discontinuation of marketing of its Medicare supplement products.
Universal American's insurance business is now heavily concentrated in
Medicare Advantage in specific core markets. Additionally, Universal
American has upstreamed extraordinary dividends, which could pressure
the risk-adjusted capitalization of its insurance entities as dividends
are the primary source of parent company cash flows.
The rating affirmations for American Progressive and Pyramid Life
reflect their role as core subsidiaries of Universal American. On a
consolidated basis, these entities continue to generate over half of the
organization's revenue and service almost three-fifths of its Medicare
Advantage enrollment. Operating results for these entities have
consistently been positive, and margins have shown improvement.
Risk-adjusted capitalization for these companies has moderated somewhat
due to dividends to the parent, but they have been mostly offset by
favorable net income and a decline in business and insurance risk. These
entities are anticipated to continue to contribute favorably to the
overall operating earnings of Universal American.
The rating affirmations for American Pioneer, Constitution Life,
Marquette National, Union Bankers and SelectCare recognize their
contribution to the overall business profile of the organization through
product and rate flexibility as well as overall favorable operating
earnings and good levels of risk-adjusted capitalization. A.M. Best
notes that these entities are not currently marketing new Medicare
supplement policies; however, SelectCare is actively marketing Medicare
The upgrading of the ratings for Today's Options reflects the company's
improved operating results, increased level of risk-adjusted capital and
continued support by Universal American.
Going forward, positive rating actions could occur if Universal American
generates profitable premium growth while maintaining strong
capitalization in its insurance subsidiaries and diversification of
product, market segment or geography. Negative rating actions could
occur if Universal American reports significant operating losses in its
core Medicare Advantage business, experiences a drastic decline in
risk-adjusted capitalization at its insurance subsidiaries or is unable
to maintain enrollment and premium growth in Medicare Advantage business
in its core markets.
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.
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 © 2013 by A.M. Best Company, Inc. ALL RIGHTS
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