MOODY'S ASSIGNS A1 INSURANCE FINANCIAL STRENGTH RATINGS TO THREE OF ANTHEM, INC.'S OPERATING SUBSIDIARIES; DEBT RATINGS OF ANTHEM, INC. REMAIN UNCHANGED
Ratings assigned to Anthem Health Plans, Inc., Anthem Health Plans of Virginia, Inc., and Community Insurance Company
New York, November 15, 2004 -- Moody's Investors Service has assigned an A1 insurance financial strength
rating (IFSR) with stable outlook to Anthem Health Plans, Inc.,
Anthem Health Plans of Virginia, Inc., and Community
Insurance Company. Moody's stated that each company has demonstrated
strong earnings and capital levels and each has the top market share in
the state in which it operates. Each company is a significant operating
subsidiary of Anthem, Inc. (Anthem) and is required by Moody's
to have an IFSR rating assigned as part of our analysis of the debt rating
for the holding company .
Commenting on the recent approval by the Commissioner of the California
Department of Insurance of the proposed merger between Anthem and WellPoint
Health Networks Inc. (WellPoint), Moody's stated that the
debt ratings of Anthem (senior unsecured at Baa1) remain unchanged with
a stable outlook. Moody's notes that the agreement between
Anthem and the Commissioner, involving investments and contributions
in California's healthcare infrastructure, does not have a
material financial impact on the merger. The companies are now
communicating with regulators in other states in order to complete the
merger. Moody's states that once all the necessary approvals
are obtained, it will review the credit implications of any changes
to the financing of the merger that may have occurred since these were
presented to Moody's earlier this year.
Anthem Health Plans, Inc. offers a diversified mix of managed
care products in Connecticut under the Blue Cross and Blue Shield brand.
Moody's stated that the assignment of the A1 rating to Anthem Health
Plans, Inc. reflects the company's strong capitalization
(approximately 200% NAIC RBC at company action level), good
reserve adequacy, and solid financial results over the last several
years. The company has reported steadily increasing earnings over
the last several years and has been a main contributor of dividends to
its parent company, Anthem Insurance Companies, Inc.
Anthem Health Plans of Virginia, Inc. markets Blue Cross
and Blue Shield branded products in Virginia. The company was acquired
by Anthem in 2002 as part of the merger with Trigon Healthcare,
Inc. In assigning the A1 IFSR to this company, Moody's
noted the company's earnings record over the last several years,
high risk based capital level (RBC) of over 300% company action
level (CAL), and conservative reserve margins. Based on membership,
Anthem Health Plans of Virginia, Inc., is one of Anthem's
largest operating subsidiaries.
Community Insurance Company, which operates in Ohio, also
markets Blue Cross and Blue Shield branded traditional indemnity and managed
care products to individuals and groups in Ohio. According to Moody's,
the A1 IFSR assigned to Community Insurance Company is based on its strong
financial profile including solid earnings margins, an RBC level
in excess of 140% CAL (on a P&C basis), and substantial
dividends to its parent company.
The rating agency also commented that the rating of each of the operating
companies benefits from the geographic and product diversity, as
well as the capital strength and flexibility of the entire Anthem organization.
Offsetting these strengths, Moody's notes, are the major
issues affecting all health benefit insurance companies. These
include the potential for irrational pricing from Anthem's competitors,
rising medical cost trends, and the continual threat of litigation.
In addition, Moody's notes that each of the companies operates in
a defined geographic area, subjecting each company to a higher degree
of risk from state specific regulation or economic downturns.
Underlying Anthem's ratings, Moody's cited the company's diversified
health benefits operations and strong market shares in several states,
disciplined financial management, sound strategic focus, and
proven prowess in acquiring and integrating health insurance operations.
Moody's has maintained a stable outlook on Anthem's Baa1 senior
debt and Prime-2 commercial paper rating. This is based
on the expectation that the company will continue its strong historical
financial performance, including improvement in free cash-flow
and earnings-generation capacity, as well as ongoing membership
growth as a result of the strength of its leading market position and
Blue Cross and Blue Shield brand.
The rating agency also indicated that the stable outlook assumes that
the transaction with WellPoint will be completed as planned and that Anthem
will refrain from additional large, debt-financed acquisitions
and share repurchases as it integrates the two organizations. Over
time, if the company achieves expected financial and operational
improvements and reduces its debt to capital ratio to pre-acquisition
levels, the outlook or ratings of the combined company may improve.
However, the ratings or outlook could be negatively affected should
the combined company consider other large debt-financed acquisitions
in the near-term, increase its financial leverage,
or face unforeseen negative developments in the integration or financing
of this transaction.
The following ratings have been assigned with a stable outlook:
Anthem Health Plans, Inc: Insurance Financial Strength Rating
Anthem Health Plans of Virginia, Inc.: Insurance Financial
Strength Rating at A1;
Community Insurance Company: Insurance Financial Strength Rating
The following existing ratings remain unchanged with stable outlooks:
Anthem, Inc. -- senior unsecured debt rating
at Baa1; senior debt shelf rating at (P)Baa1; subordinated debt
shelf rating at (P)Baa2; preferred stock shelf rating at (P)Baa3;
short-term debt rating for commercial paper at Prime-2 (P-2);
Anthem Insurance Companies, Inc. -- insurance
financial strength rating at A1; surplus note rating at A3.
Anthem Inc., domiciled in Indiana, offers various group
and individual medical products, including indemnity, preferred
provider organization (PPO), point of service (POS) and health maintenance
organization (HMO) plans. The company had total assets of approximately
$13.7 billion and shareholders' equity of about $6.6
billion as of June 30, 2004.
Anthem Health Plans, Inc., which is domiciled in Connecticut,
reported premiums of approximately $1.4 billion for the
period ending June 30, 2004 and statutory surplus of $365
million as of June 30, 2004.
Anthem Health Plans of Virginia, Inc, a Virginia domiciled
insurance company, reported premiums of approximately $1.5
billion for the period ending June 30, 2004 and statutory surplus
of $798 million as of June 30, 2004.
Community Insurance Company, domiciled in Ohio, reported premiums
of approximately $1.7 billion for the period ending June
30, 2004 and statutory surplus of $468 million as of June
An IFSR is Moody's opinion of a company's financial ability to repay punctually
its senior policyholder claims and obligations.
Financial Institutions Group
Moody's Investors Service
Vice President - Senior Analyst
Financial Institutions Group
Moody's Investors Service