A.M. Best Co. has commented on the financial strength rating of B+ (Very Good) of Sierra Health Services Inc.’s HMO and health insurance entities. A.M. Best’s comments follow Sierra’s announcement of the execution of a definitive agreement to sell its workers’ compensation subsidiary, California Indemnity Insurance Company, to White Mountains Insurance Group, Ltd. Sierra’s HMO and health insurance entities include Health Plan of Nevada, Inc. and Sierra Health and Life Insurance Company Inc., respectively (both of Las Vegas).
A.M. Best views favorably Sierra’s decision to divest its discontinued workers’ compensation business. However, the pending transaction would create some modest, near-term disruption in Sierra’s balance sheet. Financial leverage would weaken to approximately 45 percent compared to less than 40 percent as of the third quarter 2003. Working capital would decline to $130 million compared to almost $200 million as of the same date due to the non-current nature of the contingent payment.
A.M. Best’s concerns are more than offset, though, by the organization’s refined focus on its very profitable Nevada-based health care businesses, especially Health Plan of Nevada. The businesses continue to increase their leading market share in the Las Vegas area where they operate a successful integrated delivery network. A.M. Best expects strong performance to continue over the medium term, which should restore the organization’s balance sheet during 2004.
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