A.M. Best Assigns "B++" - Very Good - Rating to United Concordia, United Concordia Life & Health.OLDWICK, N.J.--(BUSINESS WIRE)--Jan. 26, 1999--A.M. Best Co. today assigned initial "B++" (Very Good) ratings to United Concordia Life & Health Insurance Co., Camp Hill, Pa., and United Concordia Insurance Co., Phoenix. The ratings reflect their roles as strategic subsidiaries of United Concordia Companies Inc. (United Concordia), which is a wholly owned subsidiary Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. of Highmark Inc. The ratings also reflect their primary purpose of providing fee-for-service dental products, as well as supporting the sale of administrative service programs and dental HMO HMO health maintenance organization. HMO n. A corporation that is financed by insurance premiums and has member physicians and professional staff who provide curative and preventive medicine within certain financial, products offered by affiliated companies Affiliated Companies A situation that occurs when one company owns a minority interest (less than 50%) in another company. Also refers to companies that are related to each other in some way. Notes: An affiliated company is sometimes referred to as a subsidiary. . Furthermore, the ratings are based on the financial condition, operating performance and market profile of United Concordia, which is a licensed third-party administrator (TPA (Transient Program Area) See transient area. TPA - Transient Program Area ) and the holding company for the consolidated United Concordia organization. Highmark Inc. is a member plan of the Blue Cross & Blue Shield Blue Shield A US not-for-profit health care insurer that is a reimbursement intermediary for physicians. Cf Blue Cross. Association and the largest health insurer in Western Pennsylvania Western Pennsylvania consists of the western third of the state of Pennsylvania in the United States. Pittsburgh is the largest city in the region, with a metropolitan area of about 2.4 million people, and is the cultural center for Western Pennsylvania. , with over 60% of the market share and very strong risk-adjusted capital. Highmark's superior capitalization stems from its historically strong profitability, which is a function of its long-term significant market presence. Furthermore, Highmark provides back-end services to United Concordia via an administrative agreement. Both companies have a limited market scope and accordingly generate only modest revenues. However, their importance is expected to grow as United Concordia implements a strategy to further develop its insured commercial book of business. United Concordia has developed from a division of Highmark Inc. to become a profitable national dental insurance company, which provides coverage and administrative services to commercial companies, unions, and consumers. However, the company's scale and profitability is substantially linked to a single contract, the TRICARE (formerly CHAMPUS CHAMPUS Civilian Health & Medical Program for Uniformed Services A health care plan for military dependents and retirees operated by the DoD Types of service HMO, PPO, and fee-for-service, through a single health plan known as TriCare ) Active Duty Family Medical Dental Plan (FMDP FMDP Family Member Dental Plan ). United Concordia has a diversified product portfolio, consistent revenue growth, good cash flow, and a conservative highly liquid investment portfolio. Offsetting factors include a highly leveraged balance sheet, client concentration, underutilized managed care network, and formidable competitive environment. The United Concordia product portfolio includes fee-for-service, dental health maintenance organization (DHMO DHMO Di-Hydrogen Monoxide (water) ), dental preferred-provider organization (PPO PPO abbr. preferred provider organization PPO Managed care Preferred provider organization, see there Infectious disease Pleuropneumonia-like organism, see there ) and dental point-of-service (POS (1) See point of sale and packet over SONET. (2) "Parent over shoulder." See digispeak. POS - point of sale ) programs, which are offered on an insured and administrative service (non-insured) basis. Revenue has steadily grown due to an increase in commercially insured contracts. However, the FMDP contract is the basis for the company's improved earnings and good cash flow. In addition, the company's investment portfolio is very conservative, consisting mainly of cash and cash equivalents. United Concordia has bolstered growth mainly through acquisition, which has added considerable leverage to its balance sheet and pressured earnings. The FMDP contract continues to represent a substantial portion of the company's enrollment and revenue. A.M. Best views growth in the commercial sector as vital to attaining a more balanced customer base and sustaining adequate cash flows. To foster such growth, A.M. Best believes that United Concordia must improve PPO network utilization, strengthen distribution channels, and provide excellent client service. Furthermore, competition consists of several well-established dental operations that are strongly capitalized and maintain significant market presence in their respective markets. A.M. Best also assigned initial B++ (Very Good) ratings to three affiliated DHMOs. They are United Concordia Dental Plans, Towson, Md.; United Concordia Dental Plans of the Midwest, Southfield, Mich.; and United Concordia Dental Plans of California, Woodland Hills. The ratings reflect the companies' roles as strategic subsidiaries of United Concordia. A.M. Best Co., established in 1899, is America's oldest and most widely recognized insurance rating and information source. For more information, visit A.M. Best's Web site at http://www.ambest.com. |
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