A.M. Best Downgrades Rating of Christiana Care Health Plans; Places Rating Under Review.Business Editors OLDWICK, N.J.--(BUSINESS WIRE)--Sept. 16, 2003 A.M. Best Co. has downgraded the financial strength rating to B+ (Very Good) from B++ (Very Good) of Christiana Care Health Plans, Inc. (New Castle, DE) and placed the rating under review with negative implications. This rating action reflects the significant net loss and the large decline in statutory capital & surplus reported by Christiana Care in the second quarter 2003. Partially offsetting this adverse development is the company's strategic role as the managed care affiliate of Christiana Care Corporation (CCC CCC A very speculative grade assigned to a debt obligation by a rating agency. Such a rating indicates default or considerable doubt that interest will be paid or principal repaid. Also called Caa. ), a not-for-profit integrated health care integrated health care, n healthcare services combining the best of conventional and complementary health care. delivery system. The under review negative rating status reflects A.M. Best's ongoing assessment of the success of Christiana Care's proposed action to control future losses and reprice the Medicaid block of business and to increase capital, which may require a capital contribution from CCC. Future downgrades may follow by the first quarter 2004, if the company's capital position does not improve. In the second quarter of 2003, Christiana Care reported an underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. loss of $28.5 million and a net loss of $27.4 million. These losses are attributable to the mis-pricing of the State of Delaware Medicaid contract and include a premium deficiency reserve of $19.7 million for the fiscal year 2004 Medicaid contract, which ends June 30, 2004. As a result of the large net losses, Christiana Care's capital & surplus has declined by 75% since year-end 2002. While A.M. Best recognizes that Christiana Care is attempting to re-negotiate its Medicaid contract and to control utilization, A.M. Best remains concerned about the magnitude of the large losses on a contract that represents over 80% of Christiana Care's membership. Additionally, the low level of capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets. at Christiana Care without a contribution from CCC, places added pressure on the rating. The rating continues to rely on CCC's stated support should receivership receivership In law, state of being in the hands of a receiver, a person appointed by the court to administer, conserve, rehabilitate, or liquidate the assets of an insolvent corporation for the protection or relief of creditors. be impending im·pend intr.v. im·pend·ed, im·pend·ing, im·pends 1. To be about to occur: Her retirement is impending. 2. . CCC emphasizes comprehensive health services health services Managed care The benefits covered under a health contract , strong practitioner relations and a diversified diversified (di·verˑ·s provider network. Christiana Care is an intrinsic part of the corporate strategy and provides patients to the CCC health care system. A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com. |
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