OLDWICK, N.J.--(BUSINESS WIRE)--
A.M. Best Co. has revised the outlook to stable from negative and
affirmed the issuer credit rating (ICR) of “bb” of Universal American
Corp. (Universal American) (Rye Brook, NY) (NYSE: UAM).
A.M. Best also has revised the outlook to stable from negative and
affirmed the financial strength rating (FSR) of B++ (Good) and ICRs of
“bbb” of American Progressive Life & Health Insurance Company of New
York (American Progressive) (Rye Brook, NY) and The Pyramid Life
Insurance Company(Pyramid Life)(Overland Park, KS).
Additionally, A.M. Best has affirmed the FSR of B+ (Good) and ICRs of
“bbb-” of American Pioneer Life Insurance Company(American
Pioneer)(Lake Mary, FL), Constitution Life Insurance Company(Constitution
Life), Marquette National Life Insurance Company (Marquette
National) and Union Bankers Insurance Company(Union Bankers).
The outlook for these ratings is stable. At the same time, A.M. Best has
revised the outlook to positive from stable and affirmed the FSR of B+
(Good) and ICR of “bbb-” of SelectCare of Texas, LLC.
Concurrently, A.M. Best has affirmed the FSR of B (Fair) and ICR of
“bb+” of Today’s Options of Oklahoma, Inc.(Today’s Options)
(Oklahoma City, OK). The outlook for both ratings is stable. The above
companies are subsidiaries of Universal American and are domiciled in
Houston, TX, unless otherwise specified.
The revised outlook and ICR affirmation for Universal American reflects
its favorable near-term operating results, low financial leverage and
good liquidity. Universal American’s overall operating results and
margins have shown improvement through lowered loss ratios and decreased
administrative expenses through the first quarter of 2012. The company’s
net loss reported in 2011 was primarily associated with discontinued
operations from its Medicare Part D business, which was sold during the
year. Universal American’s debt-to-capital ratio was 15.3% at March 31,
2012, which is considered low as compared to its peers, and earnings
before interest and taxes interest coverage is projected to be very good
at over 20 times. Universal American has a good level of liquidity from
parent company cash, dividends from subsidiaries and an untapped $75
million revolving credit agreement.
Offsetting rating factors include Universal American’s declining premium
revenue and increased business concentration risk. Premiums for
Universal American have declined significantly over the last two years
due to the sale of its Medicare Part D business and enrollment losses
due to the discontinuation of Medicare Private-Fee-for-Service products
in geographies deemed to be non-core. Additionally, new sales in its
Medicare Advantage business was hindered during the last open enrollment
period due to a late release from Centers for Medicare and Medicaid
Services (CMS) sanctions. Universal American business is now highly
concentrated in Medicare Advantage products. The downward trend in
Medicare Advantage funding could pressure margins.
The rating affirmations for American Progressive and Pyramid Life
reflect their role as core subsidiaries of Universal American. On a
consolidated basis, these entities continue to generate over half of the
organization’s revenue and service approximately two-thirds of its
Medicare Advantage enrollment. The revised outlook is due to positive
near-term operating results and improved capitalization. Operating
results for these entities have consistently been positive, and margins
are showing improvement through 2011. Operations are expected to remain
profitable for 2012. American Progressive and Pyramid Life’s favorable
operating results, along with the decline in business risk, have
resulted in a strengthening of their risk-adjusted capitalization.
The rating affirmations for American Pioneer, Constitution Life,
Marquette National and Union Bankers recognize their contributions to
the overall business profile of the organization through product and
The revised outlook and rating affirmations for SelectCare of Texas
acknowledge its strong operating results and high level of risk-adjusted
capital. The rating affirmations for Today’s Options reflects its
strategic role in Universal American’s core Medicare Advantage
operations and continued support by Universal American.
Positive rating actions could occur if Universal American records
significant premium growth while maintaining strong capitalization in
its insurance subsidiaries and if these entities’ businesses become more
diversified through product, market segment or geographic expansion.
Negative rating actions could occur if Universal American reports
significant operating losses in its core Medicare Advantage business,
experiences a drastic decline in risk-adjusted capital at its insurance
subsidiaries or is unable to resume enrollment and premium growth.
The methodology used in determining these ratings is Best’s Credit
Rating Methodology, which provides a
comprehensive explanation of A.M. Best’s rating process and contains the
different rating criteria employed in the rating process. Best’s Credit
Rating Methodology can be found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is the world's oldest and most
authoritative insurance rating and information source. For more
information, visit www.ambest.com.
Copyright © 2012 by A.M. Best Company, Inc.ALL RIGHTS
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Source: A.M. Best Co.