AM Best has affirmed the Financial Strength Rating (FSR)
of A (Excellent) and the Long-Term Issuer Credit Rating (Long-Term
ICR) of “a+” (Excellent) of the core Blue Cross Blue Shield-branded
insurance subsidiaries of Anthem, Inc. (Anthem) (Indianapolis, IN)
[NYSE:ANTM], as well as its branded life insurance subsidiaries.
Concurrently, AM Best has upgraded the FSR to A (Excellent) from A-
(Excellent) and the Long-Term ICR to “a+” (Excellent) from “a-”
(Excellent) of various AMERIGROUP affiliates. All companies listed
above are collectively referred to as Anthem Health. At the same
time, AM Best has affirmed the Long-Term ICR of “bbb+” (Good), 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 ICR of “a-” (Excellent) of the members of UNICARE
Life & Health Group (UNICARE) a subsidiary of Anthem.
The outlook of these Credit Ratings (ratings) is stable. See
below for detailed listing of the companies and Long- and
Short-Term IRs.
The ratings reflect Anthem Health’s balance sheet strength,
which AM Best assesses as very strong, as well as its strong
operating performance, favorable business profile and appropriate
enterprise risk management.
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 three years,
although projected to be slightly lower in 2021. The Anthem Health
entities have been able to grow capital and support the premium
growth despite sizeable dividend payments. Anthem Health’s reported
earnings are generally stable and strong, albeit with some
fluctuations at the product and entity level. The Anthem Health
entities generated underwriting gains in excess of $4 billion over
the past five years; however, underwriting results declined each
year since 2018. Profitability metrics remains strong, although
they declined in 2020, with a return on revenue (ROR) of 4% and
return on equity (ROE) of 22.9%, compared with ROR of 4.5-5.3% and
ROE in the 27-30% range in 2016-2019. Earnings compression was due
to faster growth of lower-margin Medicare Advantage and Medicaid
lines of business, as well as initiatives taken by Anthem to
support members and providers during the COVID-19 pandemic and to
lower risk-adjustment revenues in 2021 given the lower level of
member visits with physicians in 2020 due to the pandemic. This
trend is in line with the industry and AM Best expects it to
continue. Furthermore, through nine months of 2021, Anthem Health
saw elevated claims costs related to a higher-than-anticipated
volume of COVID-19 testing, which may pressure full-year 2021
earnings. 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 shares in the
majority of its states. Strong penetration into national accounts
and large group markets continue to support Anthem Health’s leading
market position. In addition, Anthem Health expanded its individual
exchange product offerings over the past two years. AMERIGROUP
entities operate in an additional 12 states in the Managed Care
Medicaid segment, further expanding Anthem’s footprint. In
addition, various non-regulated business under the Anthem
organization, including pharmacy benefit management, complex and
home care management and behavioral health administration add a
competitive advantage in all lines of business and allow for cost
efficiencies.
The rating upgrades of the AMERIGROUP affiliates reflect closer
integration with Anthem and greater importance of the Medicaid
segment for Anthem’s overall strategy and growth. The AMERIGROUP
entities have been instrumental for capturing Medicaid growth
opportunities in the states where Anthem does not have Blue
licenses. Anthem has owned AMERIGROUP since 2012, and has been
supporting the affiliates with capital infusions when needed.
Financial leverage at Anthem was 39% as of the end of
third-quarter 2021 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 8.7 times for
2020, a slight decline when compared with 2019, but an improvement
over 2017-2018. 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. Anthem has been active in
small and midsize mergers and acquisitions over the past two years,
expanding its presence in various insurance markets and building
stronger non-regulated vertical integration. However, AM Best
considers Anthem’s goodwill plus intangibles to equity as high, at
over 94%, through September 2021. 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 UNICARE reflect its balance sheet strength, which
AM Best assesses as strong, as well as its adequate operating
performance, limited business profile and appropriate enterprise
risk management. Over the past two years, UNICARE entities have
been assuming large volume of premium from various Anthem’s
affiliates. Anthem has contributed capital to support that premium
transfer.
The FSR has been upgraded to A (Excellent) from A- (Excellent)
and the Long-Term ICR to “a+” (Excellent) from “a-” (Excellent)
with stable outlooks for the following newly added members of
Anthem Health Group:
- 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.
- AMERIGROUP Community Care of New Mexico, Inc.
- Community Care Health Plan of Louisiana, Inc.
- Community Care Health Plan of Nevada, Inc.
The FSR of A (Excellent) and the Long-Term ICRs of “a+”
(Excellent) have been affirmed with stable outlooks of the
following subsidiaries of Anthem, Inc.:
- 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-”
(Excellent) have been affirmed with stable outlooks of the
following subsidiaries of Anthem, Inc.:
- UNICARE Life & Health Insurance Company
- UNICARE Health Plan of West Virginia, Inc.
The following Long-Term IRs have been affirmed with stable
outlooks:
Anthem, Inc.— -- “bbb+” (Good) on $850 million 3.125% senior
unsecured notes, due 2022 -- “bbb+” (Good) on $750 million 2.95%
senior unsecured notes, due 2022 -- “bbb+” (Good) on $1 billion
3.3% senior unsecured notes, due 2023 -- “bbb+” (Good) on $500
million .45% senior unsecured notes, due 2023 -- “bbb+” (Good) on
$800 million 3.50% senior unsecured notes, due 2024 -- “bbb+”
(Good) on $850 million 3.35% senior unsecured notes, due 2024 --
“bbb+” (Good) on $1.25 billion 2.375% senior unsecured notes, due
2025 -- “bbb+” (Good) on $750 million 1.5% senior unsecured notes,
due 2026 -- “bbb+” (Good) on $1.6 billion 3.65% senior unsecured
notes, due 2027 -- “bbb+” (Good) on $1.25 million 4.101% senior
unsecured notes, due 2028 -- “bbb+” (Good) on $825 million 2.875%
senior unsecured notes, due 2029 -- “bbb+” (Good) on $1.1 billion
2.25% senior unsecured notes, due 2030 -- “bbb+” (Good) on $1
billion 2.55% senior unsecured notes, due 2031 -- “bbb+” (Good) on
$499 million ($336 million outstanding) 5.95% senior unsecured
notes, due 2034 -- “bbb+” (Good) on $900 million ($399 million
outstanding) 5.85% senior unsecured notes, due 2036 -- “bbb+”
(Good) on $800 million ($369 million outstanding) 6.375% senior
unsecured notes, due 2037 -- “bbb+” (Good) on $300 million ($116
million outstanding) 5.80% senior unsecured notes, due 2040 --
“bbb+” (Good) on $900 million ($885 million outstanding) 4.625%
senior unsecured notes, due 2042 -- “bbb+” (Good) on $1.5 billion
2.75% senior unsecured convertible debentures, due 2042 -- “bbb+”
(Good) on $1.0 billion ($990 million outstanding) 4.65% senior
unsecured notes, due 2043 -- “bbb+” (Good) on $800 million ($787
million outstanding) 5.1% senior unsecured notes, due 2044 --
“bbb+” (Good) on $800 million ($570 million outstanding) 4.65%
senior unsecured notes, due 2044 -- “bbb+” (Good) on $1.4 billion
4.375% senior unsecured notes, due 2047 -- “bbb+” (Good) on $850
million 4.55% senior unsecured notes, due 2048 -- “bbb+” (Good) on
$825 million 3.70% senior unsecured notes, due 2049 -- “bbb+”
(Good) on $1.0 billion 3.125% senior unsecured notes, due 2050 --
“bbb+” (Good) on $1.25 billion 3.6% senior unsecured notes, due
2051 -- “bbb+” (Good) on $250 million 4.85% senior unsecured notes,
due 2054
Anthem Insurance Companies, Inc.— -- “a-” (Excellent) on $25.1
million 9.0% surplus notes, due 2027
The following Short-Term IR has been affirmed:
Anthem, Inc.— -- AMB-2 (Satisfactory) on commercial paper
program
The following indicative Long-Term IRs under the shelf
registration have been affirmed with stable outlooks:
Anthem, Inc.— -- “bbb+” (Good) on senior unsecured debt -- “bbb”
(Good) on subordinated debt -- “bbb-” (Good) 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 use of Best’s Credit
Ratings, Best’s Preliminary Credit Assessments and AM Best press
releases, please view Guide to Proper Use of Best’s Ratings &
Assessments.
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 London, Amsterdam,
Dubai, Hong Kong, Singapore and Mexico City. For more information,
visit www.ambest.com.
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