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| S&P Rates Trigon Healthcare 'A-' and Trigon Insurance 'AA-' |
NEW YORK, March 10 /PRNewswire/ -- Standard & Poor's today assigned its
single-'A'-minus counterparty credit rating to Trigon Healthcare Inc. (Trigon)
and its 'A-1' rating on Trigon's $300 million commercial paper program. The
notes will be issued as a private placement program, exempt from SEC
registration under section 4(2). The outlook is stable.
At the same time, Standard & Poor's assigned its double-'A'-minus
counterparty credit and financial strength ratings to Trigon Insurance Co.
(d/b/a Trigon Blue Cross Blue Shield) (Trigon Insurance), a wholly owned
subsidiary of Trigon.
Major Rating Factors:
-- Trigon Insurance is the main operating subsidiary of Trigon.
-- Trigon holds an estimated 35% market share, representing 1.9 million
members, which is much larger than that of its nearest competitors.
Trigon experienced strong enrollment growth of 12% in its Virginia
commercial business in 1999.
-- Trigon's capital adequacy ratio is estimated at 236% at year-end
1999, as measured by Standard & Poor's capital adequacy model, which is
considered extremely strong.
-- Operating earnings have been very stable and very strong in the last
five years. Trigon's earnings adequacy ratio is estimated at 302% at
year-end 1999, as measured by Standard & Poor's model. Consolidated
GAAP pretax earnings were $53 million at year-end 1999, compared with
$112 million in the previous year (excluding realized gains and
losses). The lower results follow a $79.9 million nonrecurring pretax
charge associated with exiting the Southeast market, after Trigon's
subsidiary, Mid-South Insurance Co.
(Mid-South Insurance), experienced financial challenges with this
market.
-- Trigon membership continues to grow in its most cost-effective
managed care PPO and HMO products. Total membership in these products
consist of 39% and 33% of total commercial enrollment, respectively.
Trigon's good managed care capabilities are also evident in its stable
medical loss ratios, which have been 82%-84% in its commercial line of
business in the last five years.
-- Debt leverage was about 21% and pretax interest coverage ratio was
16.6 times (x) (based on consolidated earnings) at year-end 1999.
Trigon is expected to maintain debt leverage at levels no greater than
25% and pretax interest coverage ratios (based on consolidated earnings
projections) in the 9x-13x range in 2000-2002, which is consistent with
its current rating category.
-- The proceeds from the commercial paper program will be used to repay
the current loan outstanding from Trigon's $300 million five-year
revolving credit facility, which will be maintained to provide 100%
back-up for the commercial paper program.
-- Investment securities primarily in the single-'B' and double-'B'-rated
range make up about 42% of Trigon Insurance's total statutory surplus
and 20% of its total statutory assets (based on year-end 1999 data),
which Standard & Poor's views as moderately aggressive. Capital levels
remain extremely strong despite this investment portfolio makeup.
-- Despite efforts to improve the profitability of its subsidiary,
Mid-South Insurance, Trigon's entry point to the Southeast market,
financial challenges have persisted. Late in 1999, Trigon decided to
withdraw from this market. Successful expansion into the Southeast and
Mid-Atlantic regions remains a critical part of Trigon's overall growth
strategy in positioning itself as a regional player.
-- Some consolidation has occurred in the Southeast region. This could
result in heightened competition within the region as companies may
look to expand their markets into Trigon's territories.
Trigon Healthcare Inc. and Trigon Insurance Co. d/b/a Trigon Blue Cross
Blue Shield are Security Circle insurers, which means that they voluntarily
underwent Standard & Poor's most comprehensive analysis and were assigned a
rating in one of the top four categories for financial security.
OUTLOOK: STABLE
Standard & Poor's expects Trigon's earnings and capital levels in 2000 to
remain consistent with current levels, which are extremely strong. Enrollment
growth is expected to continue in 2000, Standard & Poor's said. -- CreditWire
SOURCE Standard & Poor's CreditWire
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CONTACT:
Judy Chin, 212-438-7181, or Jack Reichman,
212-438-7235, both of Standard & Poor's CreditWire
