AM Best Affirms Credit Ratings of Elevance Health, Inc. and Its Subsidiaries

AM Best, a leading global credit rating agency, has recently affirmed the credit ratings of Elevance Health, Inc. and its subsidiaries. This positive affirmation reflects the company's strong financial position and robust operating performance. In this article, we will delve into the details of this affirmation and explore the factors contributing to Elevance Health's solid credit ratings.

AM Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICRs) of "a+" (Excellent) for Elevance Health's core Blue Cross Blue Shield (BCBS)-branded insurance subsidiaries, as well as its life insurance subsidiaries. The Long-Term ICR of "bbb+" (Good) has been affirmed for Elevance Health, along with its Long- and Short-Term Issue Credit Ratings (Long-Term IR; Short-Term IR) and the Long-Term IR on the existing surplus notes of Anthem Insurance Companies, Inc.

The ratings of Anthem Health, which includes Elevance Health and its subsidiaries, reflect the group's very strong balance sheet strength, strong operating performance, favorable business profile, and appropriate enterprise risk management (ERM). AM Best assesses Anthem Health's risk-adjusted capitalization as very strong, as measured by Best's Capital Adequacy Ratio (BCAR). The group has consistently reported capital and surplus growth, driven by favorable net earnings that have outpaced premium growth. This has led to increased absolute and risk-adjusted capitalization, with a five-year compounded annual capital and surplus growth rate of nearly 8%.



Anthem Health's invested asset portfolio is relatively conservative, with a focus on investment-grade fixed income securities, cash, and short-term investments. The group also has access to significant liquidity measures, including a $4 billion revolving credit facility and a $4 billion commercial paper program. Additionally, Anthem Health has access to Federal Home Loan Bank (FHLB) program borrowings through its insurance subsidiaries.

Elevance Health's financial leverage increased to approximately 42% due to new debt issuance in October 2024. However, AM Best expects financial leverage to moderate slightly by year-end 2024, driven by merger and acquisition activities. The company's goodwill and intangibles to equity ratio is high, at over 80%, but a portion of the intangibles is the BCBS trademarks, which are required to operate as a BCBS-branded entity. Elevance Health has demonstrated strong interest coverage and operating cash flows, with consistent growth trends in revenues and earnings.

Anthem Health's operating performance is considered strong, with consistent premium growth and solid earnings. The company's operating earnings benefit from its sizeable overall membership and the related economies of scale, which improve medical expenditures and administrative expenses metrics. However, the company's Medicaid membership has declined with the advent of state redeterminations of eligibility, driving declines that have offset growth from new contracts.

In conclusion, AM Best's affirmation of Elevance Health's credit ratings reflects the company's strong financial position, robust operating performance, and favorable business profile. The company's conservative investment strategy, access to liquidity, and appropriate risk management practices contribute to its solid credit ratings. As Elevance Health continues to expand its presence in various insurance markets through strategic acquisitions, investors can expect the company to maintain its strong financial performance and stable credit ratings.