Fitch Ratings has assigned a 'BBB' Issuer Default Rating
(IDR) to UICI. Fitch is also downgrading and removing from Rating
Watch Negative the insurer financial strength (IFS) ratings of MEGA
Life and Health Insurance Company (MEGA) and Mid-West National Life
Insurance Company of Tennessee (Mid-West) to 'A-' from 'A' following
the completion of UICI's $1.7 billion acquisition by a group of
private equity firms led by The Blackstone Group, announced today. The
Rating Outlook is Stable.
Fitch's IFS ratings for MEGA and Mid-West are based on the companies' strong earnings in well-established niches, particularly in the self-employed health market, solid capitalization, and conservative investment and reserving methods. The downgrade reflects the large initial leverage associated with the acquisition, which places considerable demands on the cash flow generation capacity of the insurance companies and the uncertainty over the sustainability of recent operating results, which have been aided by pricing conditions and medical inflation trends.
Financing for the $1.7 billion deal includes a $985 million equity investment by The Blackstone Group, Goldman Sachs Capital Partners, and DLJ Merchant Banking Partners, an investment in equity by management and agents, $500 million in bank term loan debt financing, and a $100 million trust preferred security issued in a private placement. Fitch estimates the initial equity adjusted leverage will be in the high-50's% based on recapitalization accounting and will reduce to mid-30's% over the next few years. Fitch expects 2006 fixed charge coverage will be in the 7 times (x) - 8x range. Statutory capitalization is expected to remain good but to decline in the next few years as dividends from the operating companies are utilized to repay debt.
In addition Fitch is assigning a 'BBB+' IFS rating to Cheaspeake Life Insurance Company (Chesapeake), which reflects its strategic position within UICI's business and its operating profile, which differs from that of MEGA and Mid-West.
MEGA and Mid-West are the principal insurance subsidiaries of UICI, a Dallas-based provider of insurance products (primarily health) and selected financial services to niche consumer and institutional markets.
Fitch has assigned the following ratings:
UICI
-- Issuer Default Rating (IDR) 'BBB'.
The Chesapeake Life Insurance Company
-- Insurer financial strength 'BBB+'.
Fitch has also downgraded and removed the following ratings from Rating Watch Negative:
The Mega Life and Health Insurance Company
Mid-West National Life Insurance Company of Tennessee
-- Insurer financial strength to 'A-' from 'A'.
The Outlook is Stable for all ratings.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 'www.fitchratings.com'. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
Fitch's IFS ratings for MEGA and Mid-West are based on the companies' strong earnings in well-established niches, particularly in the self-employed health market, solid capitalization, and conservative investment and reserving methods. The downgrade reflects the large initial leverage associated with the acquisition, which places considerable demands on the cash flow generation capacity of the insurance companies and the uncertainty over the sustainability of recent operating results, which have been aided by pricing conditions and medical inflation trends.
Financing for the $1.7 billion deal includes a $985 million equity investment by The Blackstone Group, Goldman Sachs Capital Partners, and DLJ Merchant Banking Partners, an investment in equity by management and agents, $500 million in bank term loan debt financing, and a $100 million trust preferred security issued in a private placement. Fitch estimates the initial equity adjusted leverage will be in the high-50's% based on recapitalization accounting and will reduce to mid-30's% over the next few years. Fitch expects 2006 fixed charge coverage will be in the 7 times (x) - 8x range. Statutory capitalization is expected to remain good but to decline in the next few years as dividends from the operating companies are utilized to repay debt.
In addition Fitch is assigning a 'BBB+' IFS rating to Cheaspeake Life Insurance Company (Chesapeake), which reflects its strategic position within UICI's business and its operating profile, which differs from that of MEGA and Mid-West.
MEGA and Mid-West are the principal insurance subsidiaries of UICI, a Dallas-based provider of insurance products (primarily health) and selected financial services to niche consumer and institutional markets.
Fitch has assigned the following ratings:
UICI
-- Issuer Default Rating (IDR) 'BBB'.
The Chesapeake Life Insurance Company
-- Insurer financial strength 'BBB+'.
Fitch has also downgraded and removed the following ratings from Rating Watch Negative:
The Mega Life and Health Insurance Company
Mid-West National Life Insurance Company of Tennessee
-- Insurer financial strength to 'A-' from 'A'.
The Outlook is Stable for all ratings.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 'www.fitchratings.com'. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.