AM Best Comments on Credit Ratings of Elevance Health, Inc. and Its Subsidiaries Following Acquisition Announcement
AM Best has commented that the Credit Ratings (ratings) of Elevance Health, Inc. (Elevance) (Indianapolis, IN) [NYSE: ELV] and its insurance subsidiaries entities remain unchanged following the Jan. 23, 2023, announcement that Elevance will be acquiring Louisiana Health Service and Indemnity Company dba Blue Cross and Blue Shield of Louisiana (BCBSLA). BCBSLA is an independent licensee of the Blue Cross Blue Shield Association and offers a diversified portfolio of health products that are similar to the core insurance subsidiaries of Elevance. BCBSLA serves more than 1.9 million members with approximately $1.8 billion in capital and surplus as of year-end 2021.
AM Best will continue to monitor developments as BCBSLA, a mutual company, goes through various legal, regulatory and financial steps needed to be acquired by Elevance, a publicly traded company. In addition, it has been over a decade since Elevance last added a Blue plan to the enterprise and it is unclear how long it will take to obtain the necessary approvals in the current environment. While Elevance recently stressed its focus on joint ventures and partnerships with various Blue plans, the announcement indicates that there may be an interest toward a full merger of additional Blue plans into the organization. In AM Best's opinion, there is a possibility that this acquisition, if successful, may prompt other transactions of a similar nature, especially given that a number of Blue plans that have converted to a mutual holding company from a nonprofit structure over the past decade. Following the transaction, AM Best anticipates Elevance's financial leverage to increase slightly above its long-term target of 40%. However, Elevance has shown an ability to manage the financial leverage down to belw 40% following temporary fluctuations due to debt issuances and acquisitions. Elevance also has a high level of financial flexibility, supported by its large commercial paper program, parent company cash and a revolving credit facility. AM Best notes that BCBSLA is well-capitalized with a history of profitable, albeit fluctuating, results and the acquisition will be accretive to earnings. Elevance plans to maintain its current business strategy and the transaction is expected to close in the second half of 2023 following regulatory approval.
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