Best’s News & Research Service - September 07, 2018 11:09 AM (EDT)
A.M. Best Affirms Credit Ratings of Anthem, Inc. and Its Subsidiaries
- September 07, 2018 11:09 AM (EDT)
Oldwick //BestWire// - A.M. Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “a+” of the core Blue Cross Blue Shield-branded insurance subsidiaries of Anthem, Inc. (Anthem) (Indianapolis, IN) [NYSE:ANTM]. The outlook of these Credit Ratings (ratings) is stable.
Concurrently, A.M. Best has affirmed the Long-Term ICR of “bbb+”, the Long- and Short-Term Issue Credit Ratings (Long-Term IR; Short-Term IR) of Anthem and the Long-Term IR on the existing surplus notes of Anthem Insurance Companies, Inc. (Indianapolis, IN). The outlook of these ratings is stable.
Furthermore, A.M. Best has affirmed the FSR of A- (Excellent) and the Long-Term ICRs of “a-” of the UNICARE, AMERIGROUP and the CareMore companies. The outlook of these ratings is stable. (See link below for a detailed listing of the companies and ratings.)
The Blue Cross Blue Shield-branded entities, also referred to as Anthem Health Group (Anthem Health), are part of the core subsidiaries of Anthem.
The ratings reflect Anthem Health’s balance sheet strength, which A.M. Best categorizes as very strong, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management (ERM).
Anthem Health’s risk-adjusted capitalization is viewed as strongest, as measured by Best’s Capital Adequacy Ratio (BCAR). Anthem Health is the main source of earnings for its parent organization, with dividends exceeding $2 billion in four of the past five years, and just under $2 billion in 2017. Anthem Health has consistently reported strong underwriting and net income over the past five years, and produced very favorable results across its diverse set of business lines and in its various core markets. The group has good geographic diversity, as Anthem operates Blue Cross Blue Shield plans in 14 states with strong brand name recognition and leading market share in the majority of these states. Additionally, the Anthem companies have a strong presence in the national account/BlueCard market segment. Nevertheless, there is geographic limitation to its business based on the Blue Cross/Blue Shield licenses.
Anthem Health’s ERM is managed at the ultimate parent, Anthem, level, but it has local functionality as well. Anthem has a well-established ERM program that is coordinated at the corporate level. Anthem’s ERM is considered appropriate for its risk profile, and the company has a mature developed ERM program. Risk identification and reporting are completed on a regular basis, and ERM is incorporated into the corporate strategic planning. There is established oversight and monitoring of the ERM program.
Anthem has strong diversified earnings and revenues through its Blue Cross Blue Shield-branded entities in 14 states, as well as its non-Blue branded with CareMore, AMERIGROUP and UNICARE entities. Financial leverage at Anthem rose to just above 40% due to a combination of its November 2017 and early 2018 issuances; however, financial leverage is expected to moderate throughout 2018. This is expected to occur through a combination of the elimination of existing debt and increases in equity driven by retained earnings. Earnings before interest and taxes interest coverage was adequate at 6.2 times for 2017 but is lower than its peers. Additionally, the holding company maintains good liquidity with access to a $3.5 billion revolving-credit facility, a $2.5 billion commercial paper program, and certain of its insurance subsidiaries are members of the Federal Home Loan Bank of Indianapolis with the ability to borrow funds if needed. While Anthem’s goodwill plus intangibles to equity is considered high at over 100%, it is similar to some of its peers. Furthermore, A.M. Best acknowledges that a portion of the intangibles is the Blue Cross/Blue Shield trademarks, which are required to operate as a Blue Cross Blue Shield-branded entity.
For a complete listing of Anthem, Inc. and its subsidiaries’ FSRs, Long-Term ICRs and Long- and Short-Term IRs, please visit Anthem, Inc.
This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.
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