Please Note
We brought you to this page based on your search query. If this isn't what you are looking for, you can continue to Search Results for ""
The maximum number of items you can export is 3,000. Please reduce your list by using the filtering tool to the left.
Close
Close
Email Research
Recipient email addresses will not be used in mailing lists or redistributed.
Recipient's
Email

Use semicolon to separate each address, limit to 20 addresses.
Enter the
characters you see
Close
Email Research
Thank you for your interest in sharing Moody's Research. You have reached the daily limit of Research email sharings.
Close
Thank you!
You have successfully sent the research.
Please note: some research requires a paid subscription in order to access.
Email page
Email
print page
Print

Rating Action:

Moody’s upgrades Molina Healthcare’s ratings (senior debt to Ba3); outlook changed to stable

06 October 2020


New York , October 6, 2020 - Moody's Investors Service has upgraded the senior unsecured debt ratings of Molina Healthcare, Inc. (Molina, NYSE: MOH) by two notches to Ba3 from B2 and the insurance financial strength (IFS) ratings of six of Molina's regulated insurance operating subsidiaries (see list below) by one notch to Baa3 from Ba1. With the upgrade, the outlook on Molina, a provider of government sponsored health care products for low-income families and individuals, and its rated operating subsidiaries has been changed to stable from positive.

RATINGS RATIONALE

The upgrade of Molina's ratings reflects the sustainability of results since Moody's last upgraded the ratings and changed the outlook to positive in April 2019. In 2018, the new management team effected a major turnaround with net income of $707 million after a loss of over $500 million the previous year. Results were sustained in 2018 with net income of $737 million. Accordingly, the company's EBITDA margin has improved substantially and was 6.8% in 2019, which is strong for a Medicaid-focused insurer. Given the strong earnings, leverage, as measured by debt-to-EBITDA with Moody's adjustment was 1.6x as of Q2 2020. The improved results reflect the significant improvements management made in various areas including payment integrity, medical management, and provider contracts among other changes.

The two-notch upgrade of the debt rating returns notching between the IFS and debt ratings to the standard three notches. In 2017, Moody's had lowered the IFS rating to Ba1 from Baa3 and the senior unsecured debt to B2 from Baa3, resulting in a a four-notch differential between the two ratings, reflecting increased potential for loss to debt holders following significant losses and increased leverage. Given the company's improved performance, as reflected in the current upgrade the extra notch is no longer warranted.

Molina's strengths are partly offset by its concentration in Medicaid, high leverage as measured by debt-to-capital and lower membership levels in recent years. Adjusted debt-to-capital was 51.5% as of June 30, partially reflecting management's decision to hold higher levels of liquidity because of the uncertainty surrounding the coronavirus pandemic. At that date, the company reported $1.2 billion of cash, cash equivalents and investments, compared to a typical level of approximately $100 million. However, Moody's notes that much of this will be used to pay for pending acquisitions. Additionally, membership trends were weak in recent years, with total membership declining from 4.5 million at year-end 2017 to 3.6 million of Q2 2020, reflecting the loss of Medicaid contracts and declines, some of it deliberate, in individual market membership. Moody's expects membership to increase going forward as management executes its growth strategy. Molina has announced four acquisitions in the last year (two have closed, two pending), which will bring in up to 800 thousand members and boost revenues by almost 30%.

Molina is also facing several risks beyond its control, largely related to potential policy changes. Most notably, the Supreme Court will likely rule on the constitutionality of the Affordable Care Act in 2021. An adverse ruling would be credit negative for Molina because it would end programs for which Molina currently serves approximately one million members. Should an adverse ruling occur, Moody's could change the outlook to negative, subject to our expectation of how such a ruling could affect Molina.

The coronavirus pandemic has bolstered earnings as the costs of the virus were more than offset by the benefit from deferred procedures, although Moody's does not expect a lasting benefit. Molina's Medicaid membership has also benefited as unemployment has increased and states have suspended Medicaid eligibility redeterminations. Still, the ultimate impact of the coronavirus pandemic on health insurers remains uncertain depending on its severity and duration.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

Factors that could lead to a rating upgrade include: (i) Improved diversification beyond the company's concentration in Medicaid and the individual full-risk business and (ii) adjusted debt to capital sustained below 45%, with a well laddered debt structure, and adjusted debt to EBITDA remains below 2.5x; (iii)) steady profitable organic growth of medical membership.

Factors that could lead to a rating downgrade include: (i) a material decline in profitability, with an EBITDA margin (with Moody's adjustments) below 3.5%; or (ii) no improvement in adjusted debt-to-capital from current levels (around 51.5% at Q2 2020) and/or debt/EBITDA increasing to above 3.0x; or (iii) a 10% decline in membership in a given year, or the unexpected loss of a major Medicaid contract.

The following ratings were upgraded:

..Issuer: Molina Healthcare, Inc.

....Senior Unsecured Regular Bond/Debenture, to Ba3 from B2

..Issuer: Molina Healthcare of California

....Insurance Financial Strength, to Baa3 from Ba1

..Issuer: Molina Healthcare of Michigan, Inc

....Insurance Financial Strength, to Baa3 from Ba1

..Issuer: Molina Healthcare of New Mexico, Inc

....Insurance Financial Strength, to Baa3 from Ba1

..Issuer: Molina Healthcare of Ohio, Inc

....Insurance Financial Strength, to Baa3 from Ba1

..Issuer: Molina Healthcare of Texas, Inc.

....Insurance Financial Strength, to Baa3 from Ba1

..Issuer: Molina Healthcare of Washington Inc

....Insurance Financial Strength, to Baa3 from Ba1

Outlook Actions

..Issuer: Molina Healthcare, Inc.

..Issuer: Molina Healthcare of California

..Issuer: Molina Healthcare of Michigan, Inc

..Issuer: Molina Healthcare of New Mexico, Inc

..Issuer: Molina Healthcare of Ohio, Inc

..Issuer: Molina Healthcare of Texas, Inc.

..Issuer: Molina Healthcare of Washington Inc

....Outlook, changed to stable from positive

Molina Healthcare, Inc. is headquartered in Long Beach, California. Through June 30, 2020 total revenue (including investment income) was $9.2 billion with net income of $454 million. Medical membership as of June 30, 2020 was approximately 3.6 million members. As of June 30, 2020 the company reported total equity of $2.0 billion.

The principal methodology used in these ratings was US Health Insurance Companies Methodology published in November 2019 available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1187569 . Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004 .

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The ratings have been disclosed to the rated entities or their designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569 .

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Dean Ungar, CFA
VP-Sr Credit Officer
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

Scott Robinson, CFA
Associate Managing Director
Financial Institutions Group
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

Releasing Office :
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

© 2020 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND/OR ITS CREDIT RATINGS AFFILIATES ARE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. MOODY’S INVESTORS SERVICE DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S INVESTORS SERVICE CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS (“ASSESSMENTS”), AND OTHER OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS, AND PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS OR PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER. ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT.

MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.

All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY’S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing its Publications.

To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S.

To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING, ASSESSMENT, OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.

Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody’s Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and Moody’s investors Service also maintain policies and procedures to address the independence of Moody’s Investors Service credit ratings and credit rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody’s Investors Service and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.

Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.