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S&P changes some health insurance companies' ratings
Standard & Poor's said it withdrew its recovery ratings on all rated health insurance companies' debt issues and consequently changed some of the issue-level ratings on these debt issues.
The agency downgraded Amerigroup Corp.'s $50 million bank loan due 2012 and $351.3 million bank loan due 2012 to BB from BB+, upgraded the company's $260 million notes due 2012 to BB from B+ and downgraded HealthSpring Inc.'s $100 million revolver due 2012 and $300 million term loan A due 2012 to B+ from BB-.
Health Net Inc.'s $400 million 6 3/8% notes due 2017 remain unchanged at BB, and Aveta Inc.'s $20 million bank loan due 2010 and $485 million bank loan due 2011, CareMore Holdings Inc.'s $25 million revolver due 2012 and $100 million term loan due 2013 and Bravo Health Inc.'s $25 million revolver due 2012 and $90 million term loan B due 2013 remain unchanged at B.
These actions are the result of a change in S&P's application of criteria for rating debt issued by health insurers, the agency said. Under the original recovery rating criteria adopted in May 2007, S&P determined an issue-level rating based on the issuer credit rating as adjusted per the recovery rating (i.e., by notching up or down from the issuer credit rating).
However, the agency now believes there are growing uncertainties in the industry about how to appropriately factor in the impact of regulatory intervention on enterprise valuation. Therefore, it will no longer use the recovery analysis methodology to determine the issue-level ratings on health insurers' debt issues and is reverting to its original methodology for notching, which is based on structural subordination.
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