A.M. Best Affirms Ratings of Operating Subsidiaries of Triple-S, Management Corporation

Business Wire,  June 18, 2008  

• E-mail
• Print
• Link

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating (FSR) of B++ (Good) and issuer credit ratings (ICR) of "bbb+" of Triple-S, Inc. (TSI) and Triple-S Vida, Inc. (TSV). Additionally, A.M. Best has affirmed the debt rating of "bbb" on $50 million 6.30% senior unsecured notes due 2019 of TSI.

A.M. Best also has adjusted the ICR to "bb+" from "bbb-" of the holding company, Triple-S Management Corporation (TSM) (NYSE: GTS). The adjustment of the ICR at TSM is not due to any changes in the financial fundamentals of the organization, but was taken in order to align and conform TSM's rating to A.M. Best's standard notching of three between the operating insurer and the related holding company. The outlook for all ratings is stable. All companies are domiciled in San Juan, PR.

These rating actions reflect TSI's blue brand strength in Puerto Rico, its market share and the improvement in its capital position. TSI benefits from strong brand name recognition in its market and has the largest share of all managed care companies operating in the Puerto Rico market. However, its market share has slightly declined over the last several years as competitors have positioned themselves in the Medicare markets. The level of risk-based capital (RBC) at TSI has improved to over 600% of authorized control level (ACL) at year-end 2007 from 520% at year-end 2006. Additionally, the debt-to-capital ratio at TSM has improved to 26.7% at the end of March 2008 from 35% at year-end 2006.

Offsetting these positive rating factors is TSI's concentration in earnings from government sponsored programs. A large portion of TSI's revenues are generated from the Medicare and Health Reform businesses, which are susceptible to federal and state government regulations. The overall dependence on Medicare and Reform may challenge TSI's earnings in the future, should there be a change in funding for Medicare Advantage or delays in rate increases for health reform. In addition, TSM has low debt service capacity with earnings before interest & taxes (EBIT) interest coverage less than six times earnings, although its access to the capital markets has been greatly enhanced since the initial public offering in December 2007. Interest coverage below six times is considered low for the managed care industry, which is the primary driver of earnings for TSM. Debt-to-capital levels have been tempered in 2007 partially due to the initial public offering. However any significant issuance of debt may push debt-to-capital levels above 30%, which is a level considered high when compared to its peers.

For Best's Debt Ratings, all other Best's Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.

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. For more information, visit www.ambest.com.

COPYRIGHT 2008 Business Wire
COPYRIGHT 2008 Gale, Cengage Learning