S&P cuts Medical Card to B-

Standard & Poor's said it lowered the counterparty credit rating on Medical Card System Inc. to B- from B.

The agency also said it lowered the counterparty credit ratings on its operating companies, MCS Advantage Inc., MCS Life Insurance Co. and MCS Health Management Options Inc., to BB- from BB.

All of the ratings were placed on CreditWatch with negative implications.

The downgrade and CreditWatch placement follows the company's unexpected third-quarter 2011 operating losses and news that it will replace several key executives, including the chief executive officer, with an interim management team affiliated with the Gorman Health Group, S&P said.

The agency said it believes that both of these events increase the probability of a covenant breach in the fourth quarter.

The third-quarter losses were mainly the result of increased claims activity in the company's Medicare Advantage business, the agency said.

However, the positive fourth-quarter seasonality that is characteristic of the Puerto Rico health insurance marketplace could offset the increased pressure on earnings, S&P said.

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