A.M. Best Comments on Credit Ratings of Anthem, Inc. and Its Subsidiaries Following Acquisition Announcement

OLDWICK, N.J.--(BUSINESS WIRE)-- A.M. Best has commented that the Credit Ratings (ratings) of Anthem, Inc. (Anthem) (Indianapolis, IN) [NYSE:ANTM] and its insurance subsidiaries remain unchanged following the announcement that Anthem has entered into an agreement to acquire HealthSun, an integrated system that includes a Medicare Advantage health plan and health care delivery network in Florida.

The acquisition will strengthen Anthem’s enrollment in Florida adding about 40,000 Medicare Advantage members to Anthem’s existing Simply Healthcare Medicare Advantage and Amerigroup Managed Medicaid membership. HealthSun’s Medicare Advantage plans are highly rated at 4.5 Stars. The transaction also will provide Anthem membership with care delivery capabilities with the addition of HealthSun’s primary care and specialty centers, as well as their unaffiliated network of medical centers. Furthermore, the acquisition positions Anthem to better serve dual Medicare and Medicaid eligible individuals in the state.

The transaction is expected to close in the fourth quarter of 2017 pending the necessary regulatory approvals and to be financed through cash. Anthem’s finance leverage was approximately 38%, and cash and investments at the holding company were $2.8 billion as of June 30, 2017. However, Anthem still has the outstanding issue of the break-up fee related to the termination of the merger agreement with Cigna Corporation (Cigna) and related lawsuit by Cigna and counter lawsuit by Anthem. The break-up fee, as per the original merger agreement, was set at $1.85 billion. A.M. Best expects Anthem will manage its financial leverage to below 45%. Anthem’s financial flexibility is favorable, with cash and investments at the holding company being supplemented by its $2.5 billion commercial paper program, $3.5 billion untapped revolving credit facility and subsidiary dividend capacity that has been over $2.4 billion for each of the past three years.

Anthem’s operating results continue to be strong, and holding company liquidity is very good. Current year top-line growth for Anthem is being driven by enrollment gains predominantly in Local Group, Individual and Medicare business. Operating earnings remain strong; however, operating margins are lower than prior year due to increased benefit expenses. Furthermore, operating cash flows continue to be favorable and were 1.7 times net income through June 30, 2017. Anthem’s operating margins have declined in part due to business mix change related to the growth in government business, which typically produces lower margins than commercial business, as well as challenges in attaining profitability in individual business.

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.

A.M. Best is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2017 by A.M. Best Rating Services, Inc. and/or its subsidiaries. ALL RIGHTS RESERVED.

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A.M. Best
Bridget Maehr, +1 908-439-2200, ext. 5321
Senior Financial Analyst
Christopher Sharkey, +1 908-439-2200, ext. 5159
Manager, Public Relations
Sally Rosen, +1 908-439-2200, ext. 5280
Senior Director
Jim Peavy, +1 908-439-2200, ext. 5644
Director, Public Relations

Source: A.M. Best

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