Credit Rating giant A.M. Best has reiterated the Financial Strength Rating of A (Excellent) as well as the Long-Term Issuer Credit Ratings (“ICR”) of “a+” for the core Blue Cross Blue Shield-branded insurance units of Anthem, Inc. (ANTM - Free Report) . The Blue Cross Blue Shield-branded entities are also known as the Anthem Health Group.
Additionally, the credit rating agency has affirmed the Long-Term ICR of “bbb+” along with the Long-Term IR and Short-Term IR of the company and the Long-Term IR on the remaining surplus notes of Anthem Insurance Companies.
Financial Strength Rating of A- (Excellent) and the Long-Term ICRs of “a-” for the UNICARE, AMERIGROUP and the CareMore companies were also affirmed by the rating agency.
The outlook of all the above ratings is stable.
Rationale Behind the Ratings
The rating agency acknowledge the company’s solid balance sheet, impressive operational performance, unique business profile and a strong enterprise risk management (ERM) platform.
The company’s risk-adjusted capitalization is said to be strongest as measured by Best’s Capital Adequacy Ratio.
Anthem Health contributes a significant portion to the parent company’s overall earnings with dividends exceeding $2 billion in four of the past five years and falling a little below $2 billion in 2017. The company reported solid underwriting and net income over the past five years along with impressive performance in its different core markets.
The company’s financial leverage increased to more than 40% owing to its November 2017 and early 2018 issuances. The financial leverage is projected to be moderate throughout this year on account of a combination of the elimination of current debt and increase in equity. Earnings before interest and taxes interest coverage stood at 6.2 times for 2017, lower than its peers. Moreover, the holding company boasts strong liquidity with an impressive $3.5-billion revolving-credit facility and a $2.5-billion commercial paper program. This apart, some of its insurance subsidiaries are members of the Federal Home Loan Bank of Indianapolis with the right to borrow funds if needed.
It has a diversified earnings and revenue base through its Blue Cross Blue Shield-branded entities across 14 states and non-Blue branded entities via CareMore, AMERIGROUP and UNICARE. A.M. Best states that part of the intangibles constitutes the Blue Cross/Blue Shield trademarks, required to operate as a Blue Cross Blue Shield-branded entity.
Shares of this Zacks Rank #2 (Buy) company have surged nearly 39%, outperforming its industry’s increase of 31.9%.
Other Key Picks
Investors interested in the medical-HMO industry might also take a look at some other top-ranked stocks like WellCare Health Plans, Inc. (WCG - Free Report) , Molina Healthcare, Inc (MOH - Free Report) and Triple-S Management Corporation (GTS - Free Report) .
WellCare provides managed care services for government-sponsored health care programs. The company sports a Zacks Rank # 1 (Strong Buy) and managed to pull off an average four-quarter positive surprise of 53.89%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Molina provides Medicaid-related solutions to meet the health care needs of low-income families and individuals as well as assist state agencies in their administration of the Medicaid program across the United States. Sporting a Zacks Rank of 1, the stock delivered a skyrocketing average four-quarter beat of nearly 164.17% in three of the last four quarters.
Triple-S Management and its subsidiaries provide a portfolio of managed care and related products in the commercial, Medicare and Medicaid markets in Puerto Rico, the United States. It carries a Zacks Rank of 2 and managed to come up with a whopping average four-quarter earnings surprise of 187.91%.
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