A.M. Best Co. has affirmed the financial strength ratings (FSR), issuer credit ratings (ICR) and debt ratings of Centene Corporation (Centene) (headquartered in St. Louis, MO) (NYSE: CNC) and the majority of its insurance subsidiaries. The outlook for these ratings is stable.
Concurrently, A.M. Best has assigned an FSR of B+ (Good) and ICR of “bbb-” to Centene’s subsidiary, Sunshine State Health Plan, Inc. (Sunrise, FL). The outlook assigned to both ratings is stable. (See below for a detailed listing of all companies and ratings.)
The ratings are based on Centene’s multi-state market presence, consistent premium revenue growth, growing specialty service revenue and positive net income levels. Currently, Centene manages Medicaid contracts in eight states with start-up operations in two additional states. Centene has consistently recorded premium revenue growth over the last five years, driven by acquisitions and new state contracts. On a consolidated basis, the company has reported positive net income for four of the last five years. Additionally, Centene provides specialty services to its Medicaid managed care plans as well as to states that contract for those services directly. Revenue from these programs has grown to approximately 25% of total revenue. Centene also offers health insurance products in 49 states and the District of Columbia through its subsidiary, Celtic Insurance Company. Through a recent stock offering in January 2010, Centene raised $104 million of additional capital, which improved its financial leverage by decreasing the organization’s debt-to-capital ratio to a level below 30%.
Furthermore, the February 18, 2010 announcement of the acquisition of Carolina Crescent Health Plan by Centene’s subsidiary, Absolute Total Care, Inc. is expected to expand the company’s presence in South Carolina. This acquisition is consistent with Centene’s strategy to expand its market presence via acquisitions and new contracts.
Offsetting rating factors include Centene’s revenue and net income dependence on state and federally funded Medicaid programs, which are under pressure due to budget constraints and general economic conditions. Although Centene has made capital contributions in support of its subsidiaries, the risked-based capitalization of the Medicaid insurance subsidiaries is considered modest.
The FSR of B+ (Good) and ICRs of “bbb-” have been affirmed for the following subsidiaries of Centene Corporation:
The FSR of B++ (Good) and ICR of “bbb” have been affirmed for Celtic Insurance Company.
The FSR of B (Fair) and ICR of “bb” have been affirmed for University Health Plans, Inc.
An FSR of B+ (Good) and ICR of “bbb-” have been assigned to Sunshine State Health Plan, Inc.
The ICR of “bb-” has been affirmed for Centene Corporation.
The following debt rating has been affirmed:
-- “bb-” on $175 million 7.25% senior unsecured notes, due 2014
For Best’s Credit Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.
The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.