Fitch cuts Health Net to junk

Fitch Ratings said it downgraded the long-term issuer and senior debt ratings of Health Net Inc. to BB+ from BBB- and downgraded the insurer financial strength ratings of Health Net of California and Health Net of Connecticut to BBB from BBB+.

The outlook remains negative on all ratings.

The rating actions affect approximately $400 million of senior unsecured notes outstanding.

Fitch said the rating action follows the company's announcement this morning that it will take a $252 million pretax charge to earnings in the fourth quarter of 2004, primarily to reflect a settlement of provider claims disputes and adverse prior-period reserve development. The overall effect of the company's charge, combined with operating difficulties in the company's northeast operations, have resulted in a capital profile for Health Net and its regulated operating subsidiaries that is below Fitch's expectations for an investment-grade rating.

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