A.M. Best Downgrades Rating of Universal Care.Business Editors OLDWICK, N.J.--(BUSINESS WIRE)--Oct. 29, 2002 A.M. Best Co. has downgraded the financial strength rating to B- (Fair) from B+ (Very Good) of Universal Care (Signal Hill, CA). The outlook for the rating is negative. This rating action follows two consecutive years of losses and continuing capital erosion. The company's net loss of $1.4 million for the fiscal year ended June 30, 2002, was attributable to an increase in the claims liability reserve of approximately $9.2 million for the prior year and was related to commercial business. Thus, the losses in the past two years have reduced net worth by 36%. Excluding this adjustment, Universal Care would have reported net income of approximately $7.8 million. The financial flexibility of Universal Care is extremely constrained as it is a privately held, family-owned health plan, and all contributions are from family members. Although it has tried to decrease debt in the past, leverage is extremely high--and in order to meet 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 ) per California Knox-Keene requirements--it was 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". . During the past two years, Universal Care has marginally met TNE requirements. Furthermore, management does not have a clear debt target/ratio strategy. 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 approximately 62% of total company enrollment and has increased over 79% since 1998. A.M. Best believes Universal Care's profit margins may be pressured by this concentration in a government-related product line whose premium reimbursement Reimbursement Payment made to someone for out-of-pocket expenses has incurred. is 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 owns and operates nine multi-specialty medical clinics. Moreover, the company owns 14 dental office sites, nine pharmacies and 10 optometry optometry (ŏptŏm`ətrē), eye-care specialty concerned with eye examination, determination of visual abilities, diagnosis of eye diseases and conditions, and the prescription of lenses and other corrective measures. facilities. 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. Universal Care is the second-largest Medi-Cal plan in Los Angeles Los Angeles (lôs ăn`jələs, lŏs, ăn`jəlēz'), city (1990 pop. 3,485,398), seat of Los Angeles co., S Calif.; inc. 1850. County. 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. |
|
||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion