A.M. Best Downgrades Rating of Universal Care.Business Editors OLDWICK, N.J.--(BUSINESS WIRE)--Nov. 25, 2003 A.M. Best Co. has downgraded the financial strength rating to C (Weak) from B- (Fair) of Universal Care (Signal Hill, CA). The rating has been placed under review with negative implications. This rating action reflects significant net loss reported as of June 30, 2003 and continuing capital erosion. The under review negative rating status reflects A.M. Best's ongoing assessment of Universal Care's proposed actions to mitigate future losses and prevent further erosion of surplus. Future downgrades may follow as A.M. Best monitors developments of actions being taken by Universal Care to increase Tangible Net Equity (TNE TNE The Net Effect (UK) TNE Trusted Network Environment TNE The New Economics TNE Trans-Nasal Esophagoscopy TNE Test Nacelle Equipment TNE Thermal Noise Effect TNE Tina Network Element ) under California Knox-Keene requirements. Universal Care is currently reporting a TNE deficiency of almost $4 million. Universal Care has reported three consecutive years of losses. The company reported a net loss of $5.1 million for the fiscal year ended June 30, 2003. As a result of the large net losses, Universal Care's capital and surplus has been almost entirely depleted de·plete tr.v. de·plet·ed, de·plet·ing, de·pletes To decrease the fullness of; use up or empty out. [Latin d , currently stands at $2.1 million and has decreased by 60% since June 30, 2002. The financial flexibility of Universal Care is extremely constrained con·strain tr.v. con·strained, con·strain·ing, con·strains 1. To compel by physical, moral, or circumstantial force; oblige: felt constrained to object. See Synonyms at force. 2. as it is a privately held, family-owned health plan, and all contributions are from family members. In order to meet TNE, the company has been forced to increase subordinated debt Subordinated Debt A loan (or security) that ranks below other loans (or securities) with regard to claims on assets or earnings. Also known as "junior security" or "subordinated loan". . Universal Care is susceptible to concentration risks related to the Medi-Cal business segment, which provides coverage for medical, dental, mental health and long-term care long-term care (LTC), n the provision of medical, social, and personal care services on a recurring or continuing basis to persons with chronic physical or mental disorders. to low income families, elderly and disabled residents in California. Medi-Cal membership represents 54% of total company enrollment. A.M. Best believes Universal Care's profit margins will continue to be pressured by this concentration in a government-related product line with a premium reimbursement Reimbursement Payment made to someone for out-of-pocket expenses has incurred. not under its direct control. Universal Care primarily operates within seven Southern California Southern California, also colloquially known as SoCal, is the southern portion of the U.S. state of California. Centered on the cities of Los Angeles and San Diego, Southern California is home to nearly 24 million people and is the nation's second most populated region, counties. It is one of the few remaining mixed model HMOs (company-owned staff multi-specialty clinics/network model). Universal Care provides services to individuals, small and large employer groups employer group Association of employers Managed care An entity with a current group benefits agreement in effect with a health plan to provide covered health care services to its employee-subscribers and eligible dependents. and beneficiaries in government-sponsored programs. 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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