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S&P Rates Trigon Healthcare `A-' and Trigon Ins `AA-'.

Business Editors

NEW YORK--(BUSINESS WIRE)--Standard & Poor's

March 10, 2000-- Standard & Poor's today assigned its single-'A'-minus counterparty credit rating to Trigon Healthcare Inc. (Trigon) and its 'A-1' rating on Trigon's $300 million commercial paper program. The notes will be issued as a private placement program, exempt from SEC registration under section 4(2). The outlook is stable.

At the same time, Standard & Poor's assigned its double-'A'-minus counterparty credit and financial strength ratings to Trigon Insurance Co. (d/b/a Trigon Blue Cross Blue Shield) (Trigon Insurance), a wholly owned subsidiary of Trigon.

Major Rating Factors:
-- Trigon Insurance is the main operating subsidiary of Trigon.

-- Trigon holds an estimated 35% market share, representing 1.9 million
members, which is much larger than that of its nearest competitors. Trigon
experienced strong enrollment growth of 12% in its Virginia commercial business
in 1999.

-- Trigon's capital adequacy ratio is estimated at 236% at year-end 1999, as
measured by Standard & Poor's capital adequacy model, which is considered
extremely strong.

-- Operating earnings have been very stable and very strong in the last five
years. Trigon's earnings adequacy ratio is estimated at 302% at year-end 1999,
as measured by Standard & Poor's model. Consolidated GAAP pretax earnings were
$53 million at year-end 1999, compared with $112 million in the previous year
(excluding realized gains and losses). The lower results follow a $79.9 million
nonrecurring pretax charge associated with exiting the Southeast market, after
Trigon's subsidiary, Mid-South Insurance Co. (Mid-South Insurance), experienced
financial challenges with this market.

-- Trigon membership continues to grow in its most cost-effective managed care
PPO and HMO products. Total membership in these products consist of 39% and 33%
of total commercial enrollment, respectively. Trigon's good managed care
capabilities are also evident in its stable medical loss ratios, which have
been 82%-84% in its commercial line of business in the last five years.

-- Debt leverage was about 21% and pretax interest coverage ratio was 16.6
times (x) (based on consolidated earnings) at year-end 1999. Trigon is expected
to maintain debt leverage at levels no greater than 25% and pretax interest
coverage ratios (based on consolidated earnings projections) in the 9x-13x
range in 2000-2002, which is consistent with its current rating category.

-- The proceeds from the commercial paper program will be used to repay the
current loan outstanding from Trigon's $300 million five-year revolving credit
facility, which will be maintained to provide 100% back-up for the commercial
paper program.

-- Investment securities primarily in the single-'B' and double-'B'-rated range
make up about 42% of Trigon Insurance's total statutory surplus and 20% of its
total statutory assets (based on year-end 1999 data), which Standard & Poor's
views as moderately aggressive. Capital levels remain extremely strong despite
this investment portfolio makeup.

-- Despite efforts to improve the profitability of its subsidiary, Mid-South
Insurance, Trigon's entry point to the Southeast market, financial challenges
have persisted. Late in 1999, Trigon decided to withdraw from this market.
Successful expansion into the Southeast and Mid-Atlantic regions remains a
critical part of Trigon's overall growth strategy in positioning itself as a
regional player.

-- Some consolidation has occurred in the Southeast region. This could result
in heightened competition within the region as companies may look to expand
their markets into Trigon's territories.

Trigon Healthcare Inc. and Trigon Insurance Co. d/b/a Trigon Blue Cross Blue Shield are Security Circle insurers, which means that they voluntarily underwent Standard & Poor's most comprehensive analysis and were assigned a rating in one of the top four categories for financial security.

Outlook: Stable

Standard & Poor's expects Trigon's earnings and capital levels in 2000 to remain consistent with current levels, which are extremely strong. Enrollment growth is expected to continue in 2000, Standard & Poor's said. ---CreditWire

Copyright 2000, Standard & Poor's Ratings Services
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Publication:Business Wire
Date:Mar 10, 2000
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