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Analyst Blog

Yesterday, rating agency A.M. Best Co. assigned ratings to WellPoint Inc.’s (WLP - Analyst Report) securities that were recently registered through the universal shelf registration process. The rating agency assigned a “bbb+” rating to the company’s senior unsecured debt, “bbb” to subordinated debt and “bbb-” to preferred stock with a stable outlook.

Shelf registration is a process authorized by the U.S. Securities and Exchange Commission, which allows a single registration document to be filed by a company for the issue of multiple securities.

The proceeds from the securities’ issue are expected to be used for working capital, debt repayment, business development as well as other corporate purposes. The strong ratings are based on WellPoint’s significant global penetration, strong capital position, high liquidity, good operating performance and considerable cash flow.

A. M. Best did not change the previously assigned ratings of WellPoint and its subsidiaries. In August 2011, the rating agency had assigned “bbb+” debt ratings to the company’s $400 million 2.375% senior unsecured notes, due in 2017 and to its other tranche of $700 million senior unsecured notes, carrying an interest rate of 3.70% and due in 2021. Besides, the rating agency had also affirmed the other debt and financial strength ratings of the company.

The ratings by A. M. Best have boosted investors’ confidence, which is reflected in WellPoint’s share price. On Thursday, shares of the company closed at $64.50, up 1.54%, on the New York Stock Exchange.

Currently, the Zacks Consensus Estimate for WellPoint’s fourth-quarter earnings stand at $1.11 per share, down about 16.5% year-over-year. None of the 19 firms covering the stock revised their estimates in the last 30 days.

For 2011, earnings are expected to be $7.08 per share, climbing about 5.1% year-over-year. WellPoint is the largest insurer on the basis of enrollment, beating competitors like Aetna Inc. (AET - Analyst Report), CIGNA Corporation (CI - Analyst Report) and UnitedHealth Group Inc. (UNH - Analyst Report).

The company carries a Zacks #3 Rank, which translates into a short term Hold rating, with no clear directional pressure on the shares over the near term.

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