Close Close
Sign In
Newsletters
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards
Podcast Center Video Center Webcasts Resource Center Events
About ThinkAdvisor Contact Us Advertise With Us Asset & Logo Licensing Sitemap Terms of Service Privacy Policy Copyright © 2024 ALM Global, LLC. All Rights Reserved.
ThinkAdvisor

Life Health > Health Insurance

Agency Cuts Rating On Health Net Debt

By Allison Bell

X
Your article was successfully shared with the contacts you provided.

Moody’s Investors Service, New York, has cut its rating on senior unsecured debt issued by Health Net Inc., Los Angeles.[@@]

The move will lower the rating on the debt to Ba1, from Baa3, and it will increase the interest rate on the company’s senior notes to 9.875%, from 8.375%, Health Net says.

Moody’s estimates the rate cut affects about $400 million in debt.

Health Net provides or administers health coverage for 5.2 million people.

The downgrade is “the result of a higher degree of uncertainty with respect to Health Net’s earnings and membership over the next several quarters as well as the reduced financial flexibility of the company,” Moody’s says in a comment on the rate cut.

Health Net reported higher than expected hospital costs in California for the first quarter, and it also reported higher costs in the Northeast, Moody’s says.

Health Net counts some notes from its parent company and other affiliates in its capital, but Moody’s says it does not give credit in its adjusted risk-based capital calculation for those assets.

Moody’s might raise Health Net’s debt rating if the company’s annual net margins increase to 3%, but it might cut the rating further if annual net margins fall below 2%.

Health Net has responded to the rate by emphasizing that it already is taking action to cut its costs and increase its capital levels.

“It is important to note that Health Net’s financial condition remains sound and, as previously disclosed, our operating results are improving,” the company says in a statement.

Health Net points out that it has $1.6 billion in cash and investments.

NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.