Fitch Affirms HealthMarkets IDR at 'BBB'.CHICAGO -- Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has affirmed its Long-Term Issuer Default Rating (IDR IDR In currencies, this is the abbreviation for the Indonesian Rupiah. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. ) on HealthMarkets, Inc. at 'BBB'. The Rating Outlook is Stable. Fitch's rating on HealthMarkets, Inc. (HealthMarkets) reflects the company's strong margin and growing market share in its largest business segment as well as capital strength among its insurance subsidiaries. A number of recent transactions are contributing to Health Market's transformation from an insurer with multiple niche products to a health company increasingly focused on consumer driven health products (CDHP CDHP Consumer-Directed Health Plan CDHP Computational Diffie Hellman Problem ) for individuals, the self-employed and small businesses. In April 2006, HealthMarkets was acquired in a leveraged buy out (LBO LBO See: Leveraged buyout LBO See leveraged buyout (LBO). ) for approximately $1.7 billion by a group of private equity firms led by The Blackstone Group Blackstone Group L.P. (NYSE: BX) is a prominent private equity and investment management firm founded in 1985 by Peter G. Peterson and Stephen A. Schwarzman. The company is based in New York City, in River House on Park Avenue at Fifty-first Street, with offices in Atlanta, . In July 2006, HealthMarkets' life insurance subsidiary The MEGA Life and Health Insurance Company (MEGA) completed the sale of substantially all of the assets of its Star HRG HRG Health Research Group HRG Hogg Robinson Group HRG Herausgeber (German: Editor) HRG Hurghada, Egypt (Airport Code) HRG Horn Rimmed Glasses (TV Show character, Heroes) division for a pre-tax net gain of approximately $101 million to units a the CIGNA CIGNA CG (Connecticut General Life Insurance Company) INA (Insurance Company of North America) corporation. In October 2006, HealthMarkets also announced that it had reached an agreement to sell the assets of its Student Insurance Division, a stand-alone operating division of MEGA to UnitedHealth Group UnitedHealth Group Incorporated NYSE: UNH is a managed health care company. It is the parent of United Healthcare, one of the largest health insurers in the U.S. It was created in 1977, as UnitedHealthCare Corporation (it renamed itself in 1998), but traces its origin to a , Inc for an undisclosed sum. That transaction is expected to close by year-end 2006. Fitch's key rating concerns include a decline in the company's premium due to attrition in its dedicated agency sales force. The company's balance sheet is highly leveraged from the debt issued as part of its acquisition. Additionally, the company sold or is in the process of selling its second and third largest operating units operating unit A type of operating company that engages in transactions with outsiders and that is owned by another business. For example, in 1995 the stockholders of Capital Cities/ABC approved a $19 billion merger with the Walt Disney Company, whereupon (by revenue) comprising nearly 25% of its total revenue, increasing the concentration risks posed from its core health insurance business. HealthMarkets and its principal insurance subsidiaries are a target of a number of legal suits, as well as a multi-state market conduct exam by numerous State insurance regulators. The focus of these actions has included issues related to agent training and oversight, the companies' relationship with associations and product design. Fitch anticipates HealthMarkets will continue to address issues surrounding its marketing practices as part of its examination, however Fitch believes the extent to which this and other pending suits will impact its operations is not yet known. Fitch expects that HealthMarket's recruiting efforts and improved retention policies will increase the company's dedicated agency sales force during the 2nd half of 2006. However, as premium generation lags sales force recruitment due to training and low productivity in the early going, we anticipate flat to moderate premium growth for the near term. Fitch estimates HealthMarkets' equity credit adjusted leverage ratio as of September 30, 2006 at 28% and is considered by Fitch to be high. Some proceeds from the sale of the company's Star HRG Division were used to pay down debt and Management has indicated they intend to reduce leverage over the next few years. Based on strong margin in the company's largest business segment and the sale of the two lesser profitable divisions, Fitch anticipates capital adequacy to remain strong among the company's insurance subsidiaries. Fitch has affirmed the following ratings with a Stable Outlook: HealthMarkets --Issuer Default Rating (IDR) at 'BBB'. The Chesapeake Life Insurance Company --Insurer financial strength (IFS) at 'BBB+'. The Mega Life and Health Insurance Company Mid-West National Life Insurance Company of Tennessee --IFS at 'A-'. Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. |
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