A.M. Best Assigns Ratings to Centene Corporation and Its Insurance Subsidiaries
February 10 2009 - 11:20AM
Business Wire
A.M. Best Co. has assigned financial strength ratings
(FSR) of B+ (Good) and issuer credit ratings (ICR) of �bbb-� to
Peach State Health Plan, Inc. (Smyrna, GA), Superior
HealthPlan, Inc. (Austin, TX), Buckeye Community Health
Plan, Inc. (Columbus, OH), Coordinated Care Corporation
Indiana, Inc. (Indianapolis, IN), Managed Health Services
Insurance Corporation (Milwaukee, WI), Total Carolina Care,
Inc. (Columbia, SC) and Bankers Reserve Life Insurance
Company of Wisconsin (Milwaukee, WI). A.M. Best also has
assigned an FSR of B (Fair) and ICR of �bb� to University Health
Plans, Inc. (Edison, NJ). All of these entities are insurance
subsidiaries of Centene Corporation (Centene) (NYSE: CNC)
(headquartered in St. Louis, MO). The outlook for these ratings is
stable.
Concurrently, A.M. Best has downgraded the FSR to B++ (Good)
from A- (Excellent) and ICR to �bbb� from �a-� of Celtic
Insurance Company (Celtic) (Chicago, IL). The ratings have been
removed from under review with negative implications and assigned a
stable outlook. These ratings were placed under review in March
2008, following the announcement that Centene planned an
acquisition of Celtic. The acquisition closed in July 2008.
Additionally, A.M. Best has assigned an ICR of �bb-� and debt
rating of �bb-� to the $175 million 7.25% senior unsecured notes
due 2014 of Centene. The outlook assigned to these ratings is
stable.
The ratings are based on Centene�s multi-state market presence,
consistent premium revenue growth, growing specialty service
revenue and positive net income levels. Currently, Centene manages
Medicaid contracts in nine states. Centene has consistently
recorded premium revenue growth over the last five years, mainly
driven by acquisitions, and has reported positive net income for
four of the last five years on a consolidated basis. Centene also
provides medical management services to its Medicaid managed care
plans as well as to states that contract for those services
directly. Revenue from these programs has grown to approximately
20% of total revenue. Through the acquisition of Celtic, Centene is
now able to offer health insurance products in 49 states and the
District of Columbia.
Offsetting rating factors include Centene�s revenue and net
income dependence on state and federally funded Medicaid programs,
which could experience pressure due to budget constraints and
general economic conditions. Although Centene has made capital
contributions in support of its subsidiaries, the risked-based
capitalization of the Medicaid insurance subsidiaries is considered
modest.
The downgrading of Celtic�s ratings reflects the company�s
decline in capitalization since its acquisition by Centene. Since
being acquired by Centene, $31 million was dividended out of Celtic
in third quarter 2008, resulting in a substantially lower level of
capitalization. Furthermore, given the current recession and
declining premium revenues, significant premium growth is
unlikely.
For Best�s Debt Ratings, all other Best�s Ratings, an overview
of the rating process and rating methodologies, please visit
www.ambest.com/ratings.
The principal methodologies used in determining these ratings,
including any additional methodologies and factors, which may have
been considered, can be found at
www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is a global full-service
credit rating organization dedicated to serving the financial and
health care service industries, including insurance companies,
banks, hospitals and health care system providers. For more
information, visit www.ambest.com.
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