A.M. Best Co. has affirmed the financial strength ratings (FSR),
issuer credit ratings (ICR) and debt ratings of WellPoint, Inc.
(WellPoint) (Indianapolis, IN) (NYSE: WLP) and its insurance
subsidiaries. The outlook for some of these ratings has been revised to
stable from positive.
In addition, A.M. Best has assigned an FSR of A (Excellent) and ICR of "a+”
to Anthem Blue Cross Blue Shield Partnership Plan, Inc. (Mason,
OH). Concurrently, A.M. Best has assigned an FSR of A- (Excellent) and
ICRs of "a-” to UNICARE
Health Insurance Company of Texas (Houston, TX), UNICARE Health
Plan of Kansas, Inc. (Topeka, KS) and UNICARE Health Plan of West
Virginia, Inc. (Charleston, WV). The outlook assigned to these
ratings is stable.
Concurrently, A.M. Best has withdrawn the FSRs of A- (Excellent) and
ICRs of "a-” and
assigned a category NR-3 (Rating Procedure Inapplicable) to OneNation
Insurance Company (Indianapolis, IN) and HealthLink HMO, Inc.
(St. Louis, MO) due to the decline in premiums written by both
companies. (See link below for a complete listing of the companies and
ratings.)
The ratings of the insurance subsidiaries of WellPoint reflect the
organization’s large membership base,
geographical diversified sources of earnings, as well as its strong
earnings and operating cash flows. WellPoint experienced several years
of expansion through mergers and acquisitions. The company has become
one of the largest health insurers in the United States and serves
approximately 35 million medical members. WellPoint has expanded into
markets outside traditional managed care delivery, which has created
diversified revenue sources and consistent profitability. The
organization has effectively reduced dependence on any one customer or
segment. Earnings and operational cash flows have been strong and in
recent periods have provided a source of funding for smaller
acquisitions of companies. While the level of capitalization has
declined at these entities during the past few years, WellPoint’s
average level of risk-based capital is still above that of other for
profit companies. Additionally, WellPoint’s
current level of liquidity at the holding company is sufficient to
service its debt.
Offsetting factors include WellPoint’s
capital exposure to goodwill impairment and the challenges of membership
and earnings growth in a highly competitive and regulated environment.
Although healthcare companies are limited in terms of acquisitions,
WellPoint may continue to acquire small to mid-sized businesses and
potentially grow this exposure, which could negatively impact the firm’s
capital structure. Debt-to-tangible capital was 96.4% and total debt to
capital and surplus was 28.2% as of December 31, 2007. Organic
membership growth appears to have slowed from recent economic conditions
and increased competition. A.M. Best has concerns regarding the
organization’s growth potential, especially
in the highly competitive commercial market, without acquisitions.
For a complete listing of WellPoint Corporation’s
FSRs, ICRs and debt ratings, please visit www.ambest.com/press/032005wellpoint.pdf.
Founded in 1899, A.M. Best Company is a global full-service credit
rating organization dedicated to serving the financial and health care
service industries, including insurance companies, banks, hospitals and
health care system providers. For more information, visit www.ambest.com.
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