Health Insurers Brace for Consolidation

Standard & Poor's analysts said to expect regulations and M&A to impact the health insurance industry in 2011.
By Maria Woehr ,

NEW YORK (

TheStreet

) -- New regulations will impact health insurers' performance and prompt consolidation, but despite those changes the sector outlook remains stable, Standard & Poor's analysts said at a conference Monday morning.

"In 2011 there will be a decline in operating performance," said Joseph Marinucci, a director with S&P in New York. "Less than 30 percent of our ratings have a negative outlook. That is baked into our stable outlook in the sector."

Even with a decline in performance, rating actions will likely be limited in 2011 due to regulations, improving business, capital retention and access to capital.

"Health reform implications will remain a concern. There could be modifications and complications in terms of regulatory developments. Overall as the business shifts toward more government involvement, it will push mid-tier players out of the marketplace," said Marinucci.

As of November 15, S&P gave

UnitedHealth Group's

(UNH) - Get Report

core operating company a A+ rating with a stable outlook;

WellPoint

(WLP)

, and

Aetna's

(AET)

, core operating companies had A+ ratings with negative outlooks;

Cigna

(CI) - Get Report

, had a A rating with a Stable outlook and

Humana

(HUM) - Get Report

, had a A- rating with a Stable outlook.

--Written by Maria Woehr in New York.

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