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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - MARCH 17, 2010 12:00 AM (EDT)
A.M. Best Co. has placed under review with developing implications the financial strength rating of B++ (Good) and issuer credit rating of "bbb" of PacificSource Health Plans (PSHP) (Eugene, OR).
The rating actions are in response to PSHP's announcement that it intends to acquire ClearOne Health Plans, Inc (ClearOne). The transaction, subject to regulatory approvals, is expected to close during second quarter 2010. ClearOne is a for-profit company, providing Medicare Advantage and commercial products in Oregon, Washington, Idaho and Montana.
The acquisition should allow PSHP to expand its product offerings and increase the company's market share in Central Oregon. However, A.M. Best has concerns regarding the integration risks and PSHP's limited expertise in Government programs. In addition, the unclear regulatory future of the Medicare Advantage program may present challenges for future business growth.
Earnings at PSHP improved in 2009 driven by underwriting and investment income. Furthermore, risk-based capitalization improved at year-end 2009 even with membership and premium growth.
A.M. Best expects to meet with the management of PSHP after the transaction closes to address the integration and business strategy of the new organization.
For Best's Credit Ratings, an overview of the rating process and rating methodologies, please visit Best's Ratings & Analysis.
The principal methodologies used in determining these ratings, including any additional methodologies and factors that may have been considered, can be found at Best's Credit Rating 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.