Best’s News & Research Service - October 20, 2015 12:03 PM (EDT)
A.M. Best Places Ratings of Universal American Corp. and Its Subsidiaries Under Review
- October 20, 2015 12:03 PM (EDT)
Oldwick //BestWire// - A.M. Best has placed the issuer credit rating (ICR) of “bb” of Universal American Corp. (Universal American) (headquartered in White Plains, NY) [NYSE: UAM] under review with negative implications. A.M. Best has also placed the financial strength rating (FSR) of B++ (Good) and the ICR of “bbb” of American Progressive Life & Health Insurance Company of New York (American Progressive) (headquartered in Lake Mary, FL) and the FSR of B+ (Good) and the ICR of “bbb-” of SelectCare of Texas, Inc. (SelectCare) (Houston, TX) under review with negative implications.
Concurrently, A.M. Best has placed the FSR of B++ (Good) and the ICR of “bbb” of The Pyramid Life Insurance Company (Pyramid Life) (Oakland Park, KS) and the FSR of B+ (Good) and the ICR of “bbb-” of Constitution Life Insurance Company (Constitution Life) (Houston, TX) under review with developing implications.
The actions follow the announcement by Universal American that it has entered into a definitive agreement to sell the company’s Traditional Insurance business to Nassau Reinsurance Group (Nassau) for $43 million. Universal American also will be entitled to receive potential earn-out payments through June 30, 2018, which may result in additional payments totaling between $13 million and $24 million. The transaction includes two of Universal American’s insurance subsidiaries: Pyramid Life and Constitution Life. Traditional business currently written by American Progressive will be reinsured to Constitution Life as part of this transaction.
After completion of the transaction, it is expected that Nassau will contribute $20 million of capital in support of the business it is acquiring from Universal American.
Universal American projects that at close it will record a $150 million after-tax loss on the sale of these assets, which includes a $53 million write-down of intangible assets. Concurrently, Universal American announced the declaration of a special dividend to shareholders that will total approximately $63 million, and the repayment of the remaining balance of $45 million outstanding on their term loan.
The under review with negative implications of Universal American, American Progressive and SelectCare reflects A.M. Best concerns regarding the decline in equity for the organization, decreased premium volume, continued unfavorable earnings and lack of diversification and scale for the company’s ongoing business. The ratings will remain under review pending A.M. Best discussions with Universal American management regarding future business strategy for the organization, including business development and plans to return to favorable operating results.
The ratings of Pyramid Life and Constitution Life will remain under review pending discussion with the new management team regarding business plans under the new ownership, regulatory approval and the close of the transaction, which is expected to be in early 2016.
This press release relates to rating(s) that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please visit A.M. Best’s Ratings & Criteria Center.
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