A.M. Best Removes from Under Review and Affirms Ratings of Allegian Insurance Company

OLDWICK, N.J.--()--A.M. Best has removed from under review with negative implications and affirmed the financial strength rating (FSR) of B (Fair) and the issuer credit rating (ICR) of “bb+” of Allegian Insurance Company, d/b/a Allegian Health Plans (AHP) (San Antonio, TX). The outlook assigned to both ratings is stable. The ultimate parent of AHP is Tenet Healthcare Corporation (Tenet) [NYSE: THC].

The ratings of AHP were placed under review with negative implications following A.M. Best’s concerns regarding the material weakness in internal control over financial reporting identified during the year-end 2013 audit, as well as large reserve increases and material adjustments to AHP’s financial statements.

The rating affirmation and the revision of the outlook to stable reflect AHP’s improved underwriting results and operating earnings in 2014 and its bolstered risk-adjusted capitalization. The improvement in earnings was primarily driven by a release of premium deficiency reserves during the year. Additionally, A.M. Best notes that Tenet infused $9 million of capital into AHP in 2014 and believes that Tenet remains committed to supporting the health plan going forward. Management remains focused on ongoing initiatives, which include strengthening of underwriting guidelines, improvement in operating performance and strengthening of its balance sheet. A.M. Best anticipates that AHP will exhibit less volatility in operating results, leading to maintenance of an acceptable level of risk-adjusted capitalization over the next several years.

The removal of the under review status also reflects A.M. Best’s understanding that the aforementioned material weakness will be fully remediated by mid-2015 and that AHP’s year-end 2014 audited financial statements will not include any material reserve increases and/or audit adjustments.

A.M. Best believes a future positive rating action could occur if AHP continues to demonstrate profitable operating trends, experience less volatility in overall results and maintain a prudent level of risk-adjusted capitalization. A negative rating action may occur if the material weakness is not fully remediated, if AHP’s operating performance and/or risk-adjusted capitalization falls below A.M. Best's expectations or if another material reserve charge is recorded. Additionally, stoppage in capital support from Tenet to foster AHP’s future growth could negatively impact the plan’s ratings.

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Key insurance criteria reports utilized:

  • Evaluating Non-Insurance Ultimate Parents
  • Risk Management and the Rating Process for Insurance Companies
  • Rating Members of Insurance Groups
  • Understanding BCAR for U.S. and Canadian Life/Health Insurers

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.

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2015 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

Contacts

A.M. Best Company, Inc.
Jennifer Afriyie, 908-439-2200, ext. 5203
Financial Analyst
jennifer.afriyie@ambest.com
or
Joseph Zazzera, MBA, 908-439-2200, ext. 5797
Assistant Vice President
joseph.zazzera@ambest.com
or
Christopher Sharkey, 908-439-2200, ext. 5159
Manager, Public Relations
christopher.sharkey@ambest.com
or
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
james.peavy@ambest.com

Contacts

A.M. Best Company, Inc.
Jennifer Afriyie, 908-439-2200, ext. 5203
Financial Analyst
jennifer.afriyie@ambest.com
or
Joseph Zazzera, MBA, 908-439-2200, ext. 5797
Assistant Vice President
joseph.zazzera@ambest.com
or
Christopher Sharkey, 908-439-2200, ext. 5159
Manager, Public Relations
christopher.sharkey@ambest.com
or
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
james.peavy@ambest.com