OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has assigned Long-Term Issue Credit Ratings (Long-Term IR) of “bbb+” to the new senior unsecured notes of Anthem, Inc. (Anthem) (Indianapolis, IN) [NYSE: ANTM], which total $2.5 billion. The offering consists of $400 million of 2.375% senior unsecured notes due 2025; $1.1 billion of 2.25% senior unsecured notes due 2030; and $1.0 billion of 3.125% senior unsecured notes due 2050. The outlook assigned to these Credit Ratings (ratings) is stable. Anthem’s existing Long-Term Issuer Credit Ratings remain unchanged.
Proceeds of these notes issuances are expected to be used for working capital and general corporate purposes, including repayment of short-term and long-term debt, share repurchase and to fund acquisitions. Anthem has two debt issues totaling $1.6 billion maturing later this year and approximately $1.3 billion outstanding under its commercial paper program. It is important to note that Anthem has stopped its share repurchase program temporarily.
AM Best expects that the issuance will not have a major impact on financial leverage, as Anthem will increase the total amount of debt outstanding modestly for 2020. Anthem’s financial leverage, as calculated by AM Best, was 41.4%, and interest coverage is good at over eight times and has improved through year-end 2019. Based on discussions with management, AM Best expects Anthem’s financial leverage to continue to moderate somewhat over time, through the elimination of existing debt and an increase in equity through retained earnings. However, AM Best acknowledges that COVID-19 may cause this process to decelerate for the remainder of the year, as the organization seeks ways to maintain strong liquidity.
Anthem maintains very good liquidity through favorable cash flows from its various operating subsidiaries. Additional sources of contingent liquidity for the organization are Anthem’s cash and investments and $3.5 billion available under its combined long- and short-term credit facilities. Capitalization levels and operating results at its regulated entities continue to be strong, and Anthem maintains a leading market share across many of its Blue Cross Blue Shield states. Anthem has reported strong operating results in 2019 and through first-quarter 2020.
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