Message #3 From:
NewsBot Date: November 17, 2006 01:17:00 PM
HCA News A.M. Best Downgrades Rating of Health Care Indemnity, Inc.
OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best Co. has downgraded the financial strength rating (FSR)
to B++ (Very Good) from A- (Excellent) of Health Care Indemnity, Inc. (HCI)
(Nashville, TN). The rating has been removed from under review with
negative implications and assigned a negative outlook.
These rating actions follow the completion of the leveraged buyout (LBO)
of HCI’s ultimate parent company, HCA Inc. (HCA)
(Nashville, TN) [NYSE: HCA]
to a private equity consortium. The $33.2 billion transaction, which
includes the assumption or repayment of approximately $11.7 billion of
existing debt, makes this the largest LBO in U.S. history. The new debt
taken on by HCA places its financial leverage at an excessive level,
hence necessitating the downgrade of HCI. At the close of the
transaction, HCA’s pro forma financial
leverage (total debt to total capital) ratio is estimated to be 85%.
HCI mainly insures the primary layer of professional and general
liability risks for all domestic health care facilities owned or
indirectly owned by HCA. As a result of the LBO, coverage provided by
HCI to HCA beginning in 2007 will include a large self-insured retention
and an extraordinary dividend of $365 million, which was approved by the
Colorado Division of Insurance and paid by HCI on November 16, 2006.
Despite these changes, HCI remains very well capitalized. HCI continues
to employ a conservative reserving philosophy, and in order to further
reduce volatility has initiated a plan to liquidate its investments in
common stocks.
For Best’s Ratings, an overview of the rating
process and rating methodologies, please visit www.ambest.com/ratings.
For current Best’s Ratings, independent data
and analysis on more than 3,000 individual property/casualty companies
and A.M. Best groups, please visit www.ambest.com/pc.
A.M. Best Co., established in 1899, is the world’s
oldest and most authoritative insurance rating and information source.
For more information, visit A.M. Best’s Web
site at www.ambest.com.
