AM 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]. Concurrently, AM 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).
Furthermore, AM Best has affirmed the FSR of A- (Excellent) and
the Long-Term ICRs of “a-” of the UNICARE Life & Health Group
(UNICARE) and AMERIGROUP Health Companies (AMERIGROUP).
The outlook of these Credit Ratings (ratings) is stable. See
below for detailed listing of the companies and Long-Term IRs.
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 of Anthem Health reflect its
balance sheet strength, which AM 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). The
Anthem Health entities comprise the main source of earnings and
dividends for the parent organization, Anthem, with dividends from
subsidiaries exceeding $3 billion in each of the past two years,
and projected to be in line with these levels in 2020. The Anthem
Health entities generally have been able to grow capital despite
these dividend payments. Anthem Health’s reported underwriting
results and net income in aggregate have been favorable with some
fluctuations at the product and entity level. The Anthem Health
entities have reported underwriting income of approximately $4
billion per year and net income of approximately $3 billion to $4
billion annually, with return on revenue in the 5-6% range and
return on equity of approximately 30% in the past few years. The
group has good product and geographic diversity, as Anthem operates
Blue Cross Blue Shield plans in 14 states with excellent brand
recognition and leading market share in the majority of its states.
While there is geographic limitation to its business, based on the
Blue Cross/Blue Shield licenses, the companies have a solid
presence across its various product offerings, including
small-mid-large and national accounts and the fully insured and
self-insured segments, as well as through BlueCard.
Anthem Health’s ERM is managed by Anthem in conjunction with
local oversight and involvement. Anthem has a well-established,
developed ERM program that has a formalized governance structure
and is considered appropriate for its risk profile. Risk
identification and reporting are completed on a regular basis
throughout the year and incorporated into the organization’s
strategic planning process.
Anthem has strong and well-diversified revenue and earnings
through its Blue Cross Blue Shield-branded entities in 14 states,
as well as its non-Blue-branded entities under AMERIGROUP and
UNICAREs, and has developed its integrated medical and pharmacy
benefit management organization, Ingenio RX, which provides
additional nonregulated income. Financial leverage at Anthem
declined to approximately 38.5% as of the end of third-quarter 2020
and AM Best expects financial leverage to moderate slightly through
a combination of eliminating existing debt and increases in
shareholders’ equity. Earnings before interest and taxes interest
coverage was adequate at 8.9 times for 2019, improving in each of
the past two years. The holding company maintains ample liquidity
with access to a $2.5 billion revolving-credit facility, a $1
billion, 364-day senior revolving credit facility, a $3.5 billion
commercial paper program and access to the Federal Home Loan Bank
through several of its insurance subsidiaries. However, AM Best
considers Anthem’s goodwill plus intangibles to equity as high, at
over 92%, through September 2020. Furthermore, AM 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.
The ratings of Anthem Life Insurance Group (Anthem Life) reflect
its balance sheet strength, which AM Best categorizes as strongest,
as well as its strong operating performance, neutral business
profile and appropriate ERM. Anthem Life has ample capital with all
members adequately capitalized, and AM Best has assessed its
risk-adjusted capital at the strongest BCAR level. While Anthem has
taken dividends, none were taken in 2019, and capital expansion
overall has not been hindered significantly. Anthem Life has
produced favorable operating results, with some fluctuations, but
the organization has typically reported double-digit returns on
equity in the midteen range. The business written by this group is
not a main focus for the overall organization and its product
offerings complement those offered by Anthem Health, specifically
in the employer group market.
The ratings of AMERIGROUP reflect its balance sheet strength,
which AM Best categorizes as weak, as well as its strong operating
performance, favorable business profile, appropriate ERM and its
strategic importance to Anthem. On a consolidated basis,
capitalization for the AMERIGROUP operating entities has increased
to nearly $2 billion. Risk-adjusted capital, as measured by BCAR,
improved in 2019, but remained weak. Capital measures improved
incrementally in 2019, mainly due to retained earnings exceeding
large dividends to the parent; however, these companies still have
a weak level of risk-adjusted capital in support of their current
business and investment risk. AM Best notes that Anthem is in a
good capital position for the size of its operations and its
financial flexibility, and has supported AMERIGROUP as needed.
Additionally, the group produces very favorable operating results
and is a material contributor to revenue, earnings and cash flow
for its parent. AMERIGROUP has built excellent brand awareness and
has solid enrollment in its core markets, and allows Anthem access
to Medicaid markets outside of its core Blue Cross Blue Shield
states.
The ratings of UNICARE reflect its balance sheet strength, which
AM Best categorizes as adequate, as well as its adequate operating
performance, limited business profile, appropriate ERM and support
from as well as strategic importance to Anthem. On a consolidated
basis, capital for the UNICARE operating entities increased
significantly in 2019 due to a sizeable contribution from its
parent combined with positive operating results. As a result, the
companies’ risk-adjusted capital has improved dramatically in
support of their current growing business and investment risk.
Investments are conservative and provide sufficient liquidity to
the group. UNICARE has produced good operating results in
aggregate, although premiums and earnings have fluctuated widely.
Earnings increased again through year-end 2019, as did business
growth, mainly from assumed business. UNICARE is one of Anthem’s
brands in the Medicaid market and has a limited scope of business,
writing primarily Medicaid and dual Medicare-Medicaid business.
Through UNICARE, Anthem has licenses in all 50 states, Washington
DC and Puerto Rico; nevertheless, premiums are generated
predominantly from 10 states.
The FSR of A (Excellent) and the Long-Term ICRs of “a+” of the
following subsidiaries of Anthem, Inc. have been affirmed with a
stable outlook:
- Anthem Blue Cross Life and Health Insurance Company
- Anthem Health Plans of Kentucky, Inc.
- Anthem Health Plans of Maine, Inc.
- Anthem Health Plans of New Hampshire, Inc.
- Anthem Health Plans of Virginia, Inc.
- Anthem Health Plans, Inc.
- Anthem Insurance Companies, Inc.
- Anthem Kentucky Managed Care Plan, Inc.
- Anthem Life & Disability Insurance Company
- Anthem Life Insurance Company
- BlueCare Health Plan
- Blue Cross Blue Shield Healthcare Plan of Georgia, Inc.
- Blue Cross Blue Shield of Wisconsin
- Blue Cross of California
- Community Insurance Company
- Compcare Health Services Insurance Corporation
- Empire HealthChoice Assurance, Inc.
- Empire HealthChoice HMO, Inc.
- Greater Georgia Life Insurance Company
- HealthKeepers, Inc.
- Healthy Alliance Life Insurance Company
- HMO Colorado, Inc.
- HMO Maine
- HMO Missouri, Inc.
- Matthew Thornton Health Plan, Inc.
- Rocky Mountain Hospital and Medical Service, Inc.
The FSR of A- (Excellent) and the Long-Term ICRs of “a-” of the
following subsidiaries of Anthem, Inc. have been affirmed with a
stable outlook:
- UNICARE Life & Health Insurance Company
- UNICARE Health Plan of West Virginia, Inc.
- AMERIGROUP Community Care of New Mexico, Inc.
- AMERIGROUP Maryland, Inc.
- AMERIGROUP New Jersey, Inc.
- AMERIGROUP Tennessee, Inc.
- AMERIGROUP Texas, Inc.
- AMGP Georgia Managed Care Company, Inc.
- AMERIGROUP Washington, Inc.
- AMERIGROUP Insurance Company
- AMERIGROUP Kansas Inc.
- Community Care Health Plan of Louisiana, Inc.
- Community Care Health Plan of Nevada, Inc.
The following Long-Term IRs have been affirmed with a stable
outlook:
Anthem, Inc.— -- “bbb+” on $700 million 3.70% senior unsecured
notes, due 2021 -- “bbb+” on $850 million 3.125% senior unsecured
notes, due 2022 -- “bbb+” on $750 million 2.95% senior unsecured
notes, due 2022 -- “bbb+” on $1 billion 3.3% senior unsecured
notes, due 2023 -- “bbb+” on $800 million 3.50% senior unsecured
notes, due 2024 -- “bbb+” on $850 million 3.35% senior unsecured
notes, due 2024 -- “bbb+” on $1.25 billion 2.375% senior unsecured
notes, due 2025 -- “bbb+” on $1.6 billion 3.65% senior unsecured
notes, due 2027 -- “bbb+” on $1.25 million 4.101% senior unsecured
notes, due 2028 -- “bbb+” on $825 million 2.875% senior unsecured
notes, due 2029 -- “bbb+” on $1.1 billion 2.25% senior unsecured
notes, due 2030 -- “bbb+” on $499 million 5.95% senior unsecured
notes, due 2034 -- “bbb+” on $900 million 5.85% senior unsecured
notes, due 2036 -- “bbb+” on $800 million 6.375% senior unsecured
notes, due 2037 -- “bbb+” on $300 million 5.80% senior unsecured
notes, due 2040 -- “bbb+” on $900 million 4.625% senior unsecured
notes, due 2042 -- “bbb+” on $1.5 billion 2.75% senior unsecured
convertible debentures, due 2042 -- “bbb+” on $1.0 billion 4.65%
senior unsecured notes, due 2043 -- “bbb+” on $800 million 4.65%
senior unsecured notes, due 2044 -- “bbb+” on $600 million 5.10%
senior unsecured notes, due 2044 -- “bbb+” on $1.4 billion 4.375%
senior unsecured notes, due 2047 -- “bbb+” on $850 million 4.55%
senior unsecured notes, due 2048 -- “bbb+” on $825 million 3.70%
senior unsecured notes, due 2049 -- “bbb+” on $1.0 billion 3.125%
senior unsecured notes, due 2050 -- “bbb+” on $250 million 4.85%
senior unsecured notes, due 2054
Anthem Insurance Companies, Inc.— -- “a-” on $25.1 million 9.0%
surplus notes, due 2027
The following Short-Term IR has been affirmed:
Anthem, Inc.— -- AMB-2 on commercial paper program
The following indicative Long-Term IRs have been assigned with a
stable outlook to its new shelf registration. The ratings on the
previous shelf registration have been withdrawn:
Anthem, Inc.— -- “bbb+” on senior unsecured debt -- “bbb” on
subordinated debt -- “bbb-” on preferred stock
This press release relates to Credit Ratings that have been
published on AM 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 AM Best’s Recent Rating
Activity web page. For additional information regarding the use and
limitations of Credit Rating opinions, please view Guide to Best’s
Credit Ratings. For information on the proper media use of Best’s
Credit Ratings and AM Best press releases, please view Guide for
Media - Proper Use of Best’s Credit Ratings and AM Best Rating
Action Press Releases.
AM Best is a global credit rating agency, news publisher and
data analytics provider specializing in the insurance industry.
Headquartered in the United States, the company does business in
over 100 countries with regional offices in New York, London,
Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more
information, visit www.ambest.com.
Copyright © 2020 by A.M. Best Rating
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Joseph Zazzera, MBA Director +1 908 439 2200,
ext. 5797 joseph.zazzera@ambest.com Christopher Sharkey
Manager, Public Relations +1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com Sally Rosen Senior
Director +1 908 439 2200, ext. 5280
sally.rosen@ambest.com Jim Peavy Director,
Communications +1 908 439 2200, ext. 5644
james.peavy@ambest.com
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