Press Release - NOVEMBER 15, 2017

A.M. Best Assigns Issue Credit Ratings to Anthem, Inc.’s Forthcoming Senior Unsecured Notes

 Bridget Maehr
Senior Financial Analyst
+1 908 439 2200, ext. 5321

Sally Rosen
Senior Director
+1 908 439 2200, ext. 5280

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159

Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644


A.M. Best has assigned Long-Term Issue Credit Ratings of “bbb+” to the forthcoming $900 million 2.5% senior unsecured notes due 2020, the $750 million 2.95% senior unsecured notes due 2022, the $850 million 3.35% senior unsecured notes due 2024, the $1.6 billion 3.65% senior unsecured notes due 2027 and the $1.4 billion 4.375% senior unsecured notes due 2047 that will be issued by Anthem, Inc. (Anthem) (Indianapolis, IN) [NYSE:ANTM]. The outlook assigned to these Credit Ratings (ratings) is stable. A.M. Best expects the proceeds from this offering to be used by Anthem for the tender offer announced Nov. 14, 2017, to pay down debt including a debt maturity in January 2018 and to finance the acquisitions of HealthSun and America’s 1st Choice, which are expected to close in the fourth quarter of 2017 and the first quarter of 2018, respectively. The existing ratings of Anthem and its subsidiaries are unchanged.

A.M. Best estimates that these issuances will initially increase Anthem’s financial leverage to 45% or below, and then the company will moderate its leverage. Anthem’s finance leverage was approximately 38%, and cash and investments at the holding company were $2.0 billion as of Sept. 30, 2017. However, Anthem still has the outstanding issue of the break-up fee related to the termination of the merger agreement with Cigna Corporation (Cigna), and related lawsuit by Cigna and counter lawsuit by Anthem. The break-up fee, as per the original merger agreement, was set at $1.85 billion. Leverage estimates do not include financing for any possible payment of the break-up fee and/or any other monetary awards. Anthem’s capital deployment includes its share repurchase program, which resumed in 2017, and dividend to shareholders that have increased each of the past three years. Through Sept. 30, 2017, $1.6 billion was used to repurchase outstanding shares, and $525 million was paid out in dividends to shareholders. Nevertheless, Anthem has favorable financial flexibility, with cash and investments at the holding company being supplemented by its $2.5 billion commercial paper program, $3.5 billion untapped revolving credit facility and subsidiary dividend capacity, which has been over $2.4 billion for each of the past three years.

Anthem’s operating results continue to be strong, and holding company liquidity is very good. Operating earnings remain strong, and operating cash flows continue to be favorable at 2.1 times net income through Sept. 30, 2017. Anthem’s operating earnings are being maintained fairly level, with increased revenues being offset by margin compression. The decline in margin is in part due to business mix change related to the growth in government business that typically produces lower margins than commercial business, as well as challenges in attaining profitability in individual business.

The HealthSun and America’s 1st Choice acquisitions will strengthen Anthem’s enrollment in Florida adding approximately 170,000 Medicare Advantage members to Anthem’s existing Simply Healthcare Medicare Advantage and Amerigroup Managed Medicaid membership. Furthermore, with the addition of HealthSun’s primary care and specialty centers, as well as their unaffiliated network of medical centers, care delivery capabilities are provided to Anthem’s overall membership in Florida.

This press release relates to Credit Ratings that have been published on A.M. 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 A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.

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AMB# Company Name
058180 Anthem, Inc.
058703 Cigna Corporation