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TMCNet:  A.M. Best Removes Ratings of AvMed, Inc. From Under Review

[December 05, 2012]

A.M. Best Removes Ratings of AvMed, Inc. From Under Review

OLDWICK, N.J. --(Business Wire)--

A.M. Best Co. has removed from under review with negative implications and affirmed the financial strength rating of B+ (Good) and issuer credit rating of "bbb-" of AvMed, Inc. (AvMed) (Gainesville, FL). The outlook assigned to both ratings is negative.

The ratings for AvMed were placed under review with negative implications in December 2011 after the company reported a $43.6 million net loss and a $54.1 million decline in its capital and surplus through September. The net loss resulted from several one-time, non-recurring costs including the costs of a legal settlement, elevated physician and pharmacy cost trends, a Medicare premium rate freeze from CMS and the adverse effects of Florida's recessionary economy on premium revenue growth.

AvMed reported improved operating results through September 2012; however, the company projects a modest net loss and a corresponding decline in capital and surplus for 2012, due to the combination of a projected net loss for the fourth quarter and the potentialaccrual of a sizable premium deficiency reserve.

AvMed continues to take steps to improve its underwriting results. In late 2012, the company hired a Chief Medical Officer and a Medicare Chief Medical Officer to positively impact its medical cost trends. The company also is recruiting a Vice President of Health Care Economics who will focus on analyzing medical cost drivers, identifying opportunities to lower medical cost trends and developing medical cost trend projections. AvMed has engaged a management consulting firm to assist in updating its strategic plan and to provide a strategy execution road map.

A.M. Best believes AvMed is well-positioned at its current ratings. However, future negative rating actions are likely if underwriting results fall below A.M. Best's expectations, claim reserves become deficient and require strengthening, and/or if absolute or risk-adjusted capital deteriorates further.

The methodology used in determining these ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2012 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.


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