PacifiCare’s Ratings Are Placed on Review

Moody’s Investors Service Inc. said Monday it placed the ratings of PacifiCare Health Systems Inc. on review for possible downgrade following the announcement that the Santa Ana company’s board has authorized a new program to repurchase its shares and that it plans to acquire a struggling health plan in Texas.

Moody’s said its review will focus on how the plan to repurchase up to 12 million shares of stock might affect the company’s cash flow.

The rating service also will examine the risks of integrating the struggling Harris Methodist Health Plan in Texas with PacifiCare’s own Texas operations, as well as the potential benefits of the acquisition. The Harris health plan has about 300,000 members, primarily in Dallas and Fort Worth.

PacifiCare’s senior unsecured bank credit is rated Baa3.

The managed care giant serves about 3.7 million members.

The stock, which was trading above $100 a share early in May, closed Monday at $48.88, up $3.56, in Nasdaq trading.