AM Best has affirmed the Financial Strength Rating (FSR)
of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term
ICRs) of “a+” (Excellent) of the core Blue Cross Blue
Shield-branded insurance subsidiaries of Elevance Health, Inc.
(Elevance) (Indianapolis, IN) [NYSE: ELV], as well as its life
insurance subsidiaries. These companies collectively are 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 Elevance and the
Long-Term IR on the existing surplus notes of Anthem Insurance
Companies, Inc. (Indianapolis, IN).
Concurrently, 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 Elevance.
In addition, AM Best has affirmed the FSR of A- (Excellent) and
the Long-Term ICR of “a-” (Excellent) of WellPoint Insurance
Services, Inc. (WISI) (Honolulu, HI).
The outlook of these Credit Ratings (ratings) is stable. See the
link below for a detailed listing of the companies and the Long-
and Short-Term IRs.
The ratings of Anthem Health reflect its 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 (ERM).
The rating affirmations of Anthem Health reflect its very strong
balance sheet, which has been driven by its favorable operating
performance and strong cash flow trends. The company’s
risk-adjusted capitalization is at the very strong level, as
measured by Best’s Capital Adequacy Ratio (BCAR). Anthem Health
continues to report consistent capital and surplus growth, driven
by favorable net earnings, which has consistently outpaced premium
growth and led to increased absolute and risk-adjusted
capitalization. Anthem Health’s very strong balance sheet
assessment is also supported by its investment portfolio, which has
historically been held predominantly in investment grade fixed
income securities and cash and liquid investments, as well as minor
allocations to other invested assets. Furthermore, the group has
more-than-adequate liquidity measures and access through its
holding company to a $4 billion revolving credit facility and a $4
billion commercial paper program. Anthem Health also has access to
Federal Home Loan Bank (FHLB) program borrowings through its
insurance subsidiaries. There were no borrowings outstanding at the
company’s credit facility or FHLB borrowing as of Sept. 30,
2023.
Financial leverage at Elevance remains below 40% at the end of
third-quarter 2023. However, AM Best expects financial leverage to
increase modestly, driven by merger and acquisition activities, and
therefore will continue to monitor its leverage. Elevance has been
active in small and midsize acquisitions over the past three years,
expanding its presence in various insurance markets and building
stronger nonregulated and vertical integration capabilities.
However, while financial leverage has been managed down slightly,
AM Best considers Elevance’s goodwill plus intangibles to equity as
high, at over 90% through September 2023. 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. Elevance’s earnings before interest and
taxes coverage was solid at nearly 10 times in third-quarter 2023
and is expected to stay in the same range in the near term. Cash
flows from its regulated and nonregulated operations also have been
very good and generally increased over the past five years.
Anthem Health’s operating performance is considered strong, with
the company reporting premium growth and solid earnings. Premium
growth has been driven by enrollment gains in most of its lines of
business. The company’s operating earnings benefit from its
sizeable overall membership and the related economies of scale,
which benefits its medical expenditures and administrative expenses
metrics. However, the company’s Medicaid membership has declined
with the advent of state redeterminations of eligibility in 2023,
driving declines that have offset growth from new contracts.
Although investment income is positive, it contributes modestly to
overall net earnings. Profitability ratios remain strong as
measured by its return on revenue (ROR) and return on equity (ROE)
metrics for year-end 2022.
Anthem Health’s vast and diversified product offerings remain
the basis for its favorable business profile. The group has good
geographic diversity, as Elevance operates Blue Cross Blue Shield
(BCBS) plans in 14 states, as well as its non-Blue branded with
CareMore, AMERIGROUP and UNICARE entities. The group has benefited
from strong brand name recognition and a leading market share in
the majority of these BCBS states. Additionally, the Elevance
companies have a strong presence in the national account/BlueCard
market segment and there has been a significant expansion of
individual exchange product offerings over the past few years.
AMERIGROUP entities operate in an additional 12 states in the
Managed Care Medicaid segment, further expanding Anthem’s
footprint. In addition, various nonregulated business in 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.
Anthem Health’s ERM is managed at the ultimate parent level, but
it has local functionality as well. The ERM program is
well-established and is coordinated at the corporate level.
Elevance’s ERM is considered appropriate for its risk profile but
has a lower level of sophistication when compared with some of its
peers. 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.
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 ERM. The
ratings also factor the support of its parent. Over the past five
years, UNICARE entities have been assuming large volume of Medicaid
premium from various Elevance’s affiliates. Elevance has
contributed capital to support that premium transfer.
The ratings of WISI reflect its balance sheet strength, which AM
Best assesses as adequate, as well as its adequate operating
performance, limited business profile and appropriate ERM.
WISI’s rating affirmations reflect its risk-adjusted
capitalization at the strong level at year-end 2022, as measured by
BCAR, driven mainly by a lower capital level due to reserve
strengthening for its core lines of business and sizeable
unrealized loss on the fixed income portfolio. However, WISI’s
capital did grow, supported by positive earnings and no dividends
to the parent company through third-quarter 2023. Elevance has
demonstrated explicit and implicit support of WISI in past years.
WISI benefits from the parent’s operational resources and
expertise. WISI’s importance to the parent has increased in recent
years as the volume of business in the core and the cell has
expanded.
WISI is a Hawaii-domiciled captive and a wholly owned subsidiary
of Elevance. WISI was established nearly two decades ago primarily
for the purpose of formalized self-insurance and an instrument of
corporate risk management. In the past several years, Elevance
expanded the volume of excess managed care errors and omission
(E&O) coverage placed with WISI as the market for this line of
business has hardened considerably. In addition, WISI established a
segregated cell to assume Federal Employees Health Benefits Program
(FEP) premium from Elevance affiliates to optimize capital at
statutory entities a few years ago. Furthermore, the cell structure
provides a formal separation of FEP from other WISI business,
provides transparency for Hawaii’s regulators and allows for
potential future WISI expansion into assuming other health lines.
WISI’s core
operations in the protected cell – FEP premiums – continue to
drive revenue and earnings for the company. The core corporate
insurance lines of business – workers’ compensation and E&O –
have posted fluctuating operating results, including lower
operating losses over the past couple of years. These results have
been driven in part by fluctuations in claims severity and
increases in coverage limits, which resulted in the need for
reserve strengthening in recent years, including sizeable reserve
increases through 2022. WISI expects the consolidated financial
performance of the company to be stable in the current year.
A complete listing of Elevance Health, Inc.’s FSRs, Long-Term
ICRs and Long-Term IRs also is available.
AM Best remains the leading rating agency of alternative risk
transfer entities, with more than 200 such vehicles rated in the
United States and throughout the world. For current Best’s Credit
Ratings and independent data on the captive and alternative risk
transfer insurance market, please visit
www.ambest.com/captive.
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 Performance
Assessments, 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.
Copyright © 2023 by A.M. Best Rating
Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231219009034/en/
Jennifer Asamoah Senior Financial Analyst +1 908 882
1637 jennifer.asamoah@ambest.com
Christopher Sharkey Associate Director, Public
Relations +1 908 882 2310
christopher.sharkey@ambest.com
Joseph Zazzera Director +1 908 882 2442
joseph.zazzera@ambest.com
Al Slavin Senior Public Relations Specialist +1
908 882 2318 al.slavin@ambest.com
Elevance Health (NYSE:ELV)
Historical Stock Chart
From Apr 2024 to May 2024
Elevance Health (NYSE:ELV)
Historical Stock Chart
From May 2023 to May 2024