OLDWICK, N.J.--(BUSINESS WIRE)--
A.M. Besthas assigned a debt rating of “bbb+” to $2.7 billion of
senior unsecured notes issued by WellPoint, Inc. (WellPoint)
(Indianapolis, IN) [NYSE: WLP]. The outlook assigned to the ratings is
stable. The existing ratings of WellPoint and its subsidiaries are
The securities are being issued in four separate tranches consisting of
$850 million 2.25% five-year notes, $800 million 3.50% ten-year notes,
$800 million 4.65% 30-year notes and $250 million 4.85% 40-year notes. A
portion of the proceeds from the issuance is anticipated to be used to
repay the company’s $500 million 5.0% senior notes due December 2014 and
to redeem or repurchase all or a portion of its $1.1 billion senior
notes due in 2016. The remaining proceeds will be used for general
corporate purposes, which could include share repurchase and repayment
of outstanding commercial paper and/or long-term debt.
Although sizable, the debt issuance will effectively increase
WellPoint’s financial leverage only modestly, assuming the majority of
proceeds is ultimately used to retire debt. WellPoint’s debt-to-capital
ratio was about 38% at June 30, 2014, which A.M. Best considers
relatively high. WellPoint’s elevated leverage is mostly related to the
financing of the company’s acquisition of Amerigroup in 2012 and debt
refinancing activity in 2013. It is anticipated that leverage will
remain high for the remainder of the year due to the company’s limited
ability to reduce long-term debt, continued dividends to shareholders
and its substantial share repurchase program. Although WellPoint’s
interest coverage is good at approximately seven times, it is lower than
industry peers. Prospectively, A.M. Best expects the organization’s
interest coverage to increase and overall financial leverage to moderate
slightly, which could facilitate a positive rating action in the medium
WellPoint continues to produce strong operating cash flows.
Additionally, the company maintains strong liquidity with a high level
of holding company cash and marketable investments, robust 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.
A.M. Best Company is the world's oldest and most authoritative
insurance rating and information source. For more information, visit www.ambest.com.
Copyright © 2014 by A.M. Best Company, Inc.ALL RIGHTS
A.M. Best Company
Bridget Maehr, 908-439-2200, ext. 5321
Zazzera, MBA, 908-439-2200, ext. 5797
Assistant Vice President
Sharkey, 908-439-2200, ext. 5159
Manager, Public Relations
Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public
Source: A.M. Best Company, Inc.