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Press release from Business Wire

A.M. Best Affirms Ratings of WellPoint, Inc. and Its Subsidiaries

Tuesday, June 14, 2011

A.M. Best Affirms Ratings of WellPoint, Inc. and Its Subsidiaries11:27 EDT Tuesday, June 14, 2011 OLDWICK, N.J. (Business Wire) -- A.M. Best Co. has affirmed the financial strength ratings (FSR) and issuer credit ratings (ICR) of the insurance subsidiaries of WellPoint, Inc. (WellPoint) (Indianapolis, IN) [NYSE: WLP]. Concurrently, A.M. Best has affirmed the ICR and debt ratings of “bbb+” of WellPoint and Anthem Holding Corp. (Thousand Oaks, CA) and the debt rating of “a-” on the surplus notes of Anthem Insurance Companies, Inc. (Indianapolis, IN). The outlook for all ratings is stable. Additionally, A.M. Best has withdrawn the FSR of A- (Excellent) and ICR of “a-” of UniCare Health Plans of the Midwest (Chicago, IL). The ratings were withdrawn due to the lack of premiums reported by the company through the three months ended March 31, 2011, as this entity is no longer writing business. The affirmation of the ratings for the insurance subsidiaries of WellPoint reflects the organization's leading market share in the markets in which it operates. WellPoint serves over 34 million members and is one of the leaders in market share in all of its 14 Blue Cross and/or Blue Shield state markets. The predominant membership type is administrative services only (ASO), where 60% of WellPoint's total membership is compromised of this lower risk business. The national account sector has been a source of growth for the ASO business, and WellPoint expects 1.7% of membership growth in 2011 from this sector alone. In 2010, WellPoint reported solid consolidated operating earnings of $4.1 billion, which were driven by the commercial segment of $3.1 billion and the consumer reporting segment of $1.0 billion. Furthermore, the organization's overall benefit expenses declined due in part to lower utilization trends and favorable prior period reserve development; however, the utilization trends for 2011 are not expected to be as favorable as they were in 2010. WellPoint has improved upon its operating efficiencies, and forecasts indicate a favorable declining trend in selling, general and administrative expenses over the medium term. WellPoint's ability to generate strong cash flows is acknowledged in its ratings. Although not the sole indicator, the reporting result through March 31, 2011 of cash flows of approximately 1.2 times earnings demonstrates the organization's ability to generate cash. Partial offsetting rating factors include WellPoint's elevated amount of goodwill and other intangible assets carried on its balance sheet. As of March 31, 2011, these assets compromise approximately 42% of the company's total assets base and 88% of total consolidated shareholders' equity. A.M. Best acknowledges that WellPoint's Blue Cross Blue Shield and or Blue Cross trademarks are 75% of its total intangibles of $7.9 billion. Furthermore, WellPoint has increased its debt-to-capital ratio over the past year from 25.3% in 2009 to 27.3% in 2010. The company announced the acquisition of CareMore on June 8, 2011, which could result in an increase in its debt to capital, should WellPoint issue debt to fund the acquisition. A.M. Best does not expect this transaction to elevate the debt-to-capital ratio above 30%. WellPoint's GAAP premiums have declined over the past year; however, the decline is mainly attributed to the UniCare membership transition agreement with a competing Blue Plan, which was implemented on January 1, 2010. For a complete listing of WellPoint, Inc. and its key life/health subsidiaries' FSRs, ICRs and debt ratings, please visit www.ambest.com/press/061401wellpoint.pdf. The principal methodology used in determining these ratings is Best's Credit Rating Methodology -- Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best's rating process and highlights the different rating criteria employed. Additional key criteria utilized include: “Rating Health Insurance Companies”; “Understanding BCAR for Life and Health Insurers”; “Risk Management and the Rating Process for Insurance Companies”; “Rating Members of Insurance Groups”; “Rating Commercial Paper”; and “A.M. Best's Ratings & the Treatment of Debt.” Methodologies can be found at www.ambest.com/ratings/methodology. Founded in 1899, A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com. Copyright © 2011 by A.M. Best Company, Inc.ALL RIGHTS RESERVED.A.M. Best Co.Wayne KaminskiFinancial Analyst908-439-2200, ext. 5061wayne.kaminski@ambest.comorSally RosenManaging Senior Financial Analyst908-439-2200, ext. 5280sally.rosen@ambest.comorRachelle MorrowSenior Manager, Public Relations908-439-2200, ext. 5378rachelle.morrow@ambest.comorJim PeavyAssistant Vice President, Public Relations908-439-2200, ext. 5644james.peavy@ambest.com