A.M. Best has assigned indicative ratings of “bbb+” to senior unsecured debt, “bbb” to subordinated debt and “bbb-” to preferred stock of Anthem, Inc.’s (Anthem) (Indianapolis, IN) [NYSE:ANTM] recently filed universal shelf registration statement. The outlook assigned to these ratings is stable. A.M. Best also has withdrawn the debt ratings on the previous shelf registration filed on Dec. 9, 2011, as this registration statement has expired. The existing ratings for Anthem and its subsidiaries are unchanged.

The proceeds from any future offerings made under the shelf registration are anticipated to be used for general corporate purposes, which could include the repayment of debt, investment in subsidiaries, financing of acquisitions or business expansion or the repurchase of common stock.

The indicative ratings are based on Anthem’s favorable operating trends reported through the third quarter of 2014. Anthem has reported a good level of medical enrollment and premium growth with relatively stable operating margins on its commercial and government business segments. Anthem’s financial leverage was approximately 38% as of Sept. 30, 2014, a level A.M. Best considers on the high side. Leverage is expected to remain elevated through the remainder of the year mainly due to share repurchase activity by the company. Anthem has good interest coverage at about seven times.

Anthem has robust operating cash flow derived mostly from its Blue Cross Blue Shield operating subsidiaries. The company maintains strong liquidity with a high level of parent company cash and investments, solid subsidiary dividends, its $2.5 billion commercial paper program and its undrawn $2.0 billion credit facility.

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Key insurance criteria reports utilized:

  • Analyzing Insurance Holding Company Liquidity
  • A.M. Best’s Perspective on Operating Leverage
  • Insurance Holding Company and Debt Rating

This press release relates to rating(s) 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 visit A.M. Best’s Ratings & Criteria Center.

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