|[March 16, 2017]
A.M. Best Affirms Credit Ratings of Members of Health Net Group; Withdraws Issuer Credit Rating of Health Net, Inc.
A.M. Best has affirmed the Financial Strength Rating of B++
(Good) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of "bbb"
of Health Net of California, Inc., Health Net Life Insurance
Company (both of Woodland Hills, CA (News - Alert)), Health Net Health Plan of
Oregon, Inc. (Tigard, OR) and Health Net of Arizona, Inc.
(Tempe AZ). The outlook of these Credit Ratings (ratings) is stable.
Concurrently, A.M. Best has withdrawn the Long-Term ICR of "bb" of Health
Net, Inc. (Delaware), now an intermediate holding company within the Centene
Corporation (Centene) [NYSE: CNC]. Furthermore, Health Net Inc.'s
$400 million 6.375% senior unsecured notes due 2017 were called in
fourth-quarter 2016. In addition, Health Net, Inc. will no longer be
preparing external financial statements.
The rating affirmations reflect the financial and operational support
provided to the Health Net companies by its parent, Centene. The March
2016 Health Net acquisition established Centene as a leader in three of
the largest Medicaid states, which include California, Texas and
Florida, one of the country's largest Medicaid managed care organization
and a major provider of managed long-term support services. The Centene
organization provides the Health Net entities with increased
capabilities, enhanced systems and a platform for expanded growth. In
addition, Centene has provided capital contributions to the Health Net
goup of insurance companies when necessary.
During 2016, the Health Net companies' operating results were challenged
by the health insurer's fee and write-down of the risk corridor
receivable related to the Patient Protection and Affordable Care Act. In
addition, premium deficiency reserves were established due to claim
experience. However, the organization has taken corrective actions in
product design and pricing to improve future results. Furthermore, the
operating losses placed additional pressure on risk-adjusted
capitalization, resulting in a number of capital infusions from Centene.
A.M. Best expects continued capital support going forward, should it be
necessary. A.M. Best also notes that there may be potential challenges
to successfully integrate the organizations to realize anticipated
This press release relates to Credit Ratings that have been published
on A.M. Best's website. For all rating information relating to the
release and pertinent disclosures, including details of the office
responsible for issuing each of the individual ratings referenced in
this release, please see A.M. Best's Recent
Rating Activity web page. For additional information
regarding the use and limitations of Credit Rating opinions, please view Understanding
Best's Credit Ratings.
A.M. Best is the world's oldest and most authoritative insurance
rating and information source. For more information, visit www.ambest.com.
Copyright © 2017 by A.M. Best Rating Services, Inc. and/or its
subsidiaries. ALL RIGHTS RESERVED.
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