Recently, A. M. Best Co. affirmed the issuer credit rating
Health Net Inc.
) at "bb". The rating agency also affirmed the debt rating on the
company's $400 million 6.375% senior unsecured notes due 2017 at
Further, A. M. Best affirmed the financial strength rating
(FSR) Health Net's subsidiaries - Health Net of California, Inc.,
Health Net Life Insurance Company, Health Net Health Plan of
Oregon, Inc. and Health Net of Arizona, Inc. - at "B++" and their
ICR at "bbb." The outlook for all the above-mentioned ratings is
The rating affirmation was based on the renovation and
stabilization of the business, enhanced balance sheet strength of
Health Net and strong operating capacity. These positive factors
were somewhat offset by negatives such as a decline in operating
income, lack of geographical diversification and payer-type
concentration risk. Moreover, the company is witnessing decline
in retention rates in the commercial business.
However, overall A. M. Best believes that Health Net and its
subsidiaries meet the requirements for the rating category they
fall in. Thus, the ratings have a stable outlook indicating low
possibility of a rating change in the near term. However, if the
company witnessed a surge in leverage ratios due to insufficient
reserve formation or its risk-adjusted capitalization falls or
balance sheet gets affected due to losses over a sustained time
period, then a downward revision of ratings is possible.
Health Net currently carries a Zacks Rank #2 (Buy). Other
health maintenance organizations worth considering are
Molina Healthcare Inc.
) - Zacks Rank #1 (Strong Buy),
) - Zacks Rank #2 (Buy) and
) - Zacks Rank #2 (Buy).
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