Anthem's (ANTM) Notes Receive Rating Action From A.M Best

Anthem Inc. (NYSE:ANTM) recently received rating action on its senior unsecured notes from A.M Best. The rating giant has assigned Long-Term Issue Credit Ratings of “bbb+” to Anthem’s $900 million 2.5% notes due 2020, $750 million 2.95% notes due 2022, $850 million 3.35% notes due 2024, $1.6 billion 3.65% notes due 2027 and $1.4 billion 4.375% notes due 2047. The outlook for these Credit Ratings has remained stable.

The rating giant believes that Anthem will use the proceeds from this offering for the tender offer announced on Nov 14, 2017, to pay its debt obligations that includes a debt maturity in January 2018. The proceeds will also be used to finance the upcoming acquisitions of HealthSun and America’s 1^st Choice to be completed in the fourth quarter of 2017 and the first quarter of 2018, respectively.

According to A.M. Best, these notes issuances are likely to increase Anthem’s financial leverage to 45% or below compared with the present level of 38%. The rating giant expects the level to moderate with time. However, the issue regarding the terminated merger between Anthem and Cigna Corp (NYSE:CI) that involved a break-up fee of $1.85 billion is still not resolved. The leverage estimates do not include the possibility of the payment of this break-up fee.

In a year’s time, its shares have gained 57.7%, outperforming the industry’s rally of 40.5%

Anthem has been continuously delivering solid operating earnings on the back of revenue growth. Sufficient generation of cash flows has provided it with strong liquidity as well. Its profitability has been mainly driven by its Commercial business, partially offset by a lower margin in its government business and challenges faced in Individual business.

Moreover, the upcoming acquisitions of HealthSun and America’s 1^st Choice are likely to add nearly 170,000 Medicare Advantage members to Anthem’s existing Simply Healthcare Medicare Advantage and Amerigroup Managed Medicaid membership. Also, the addition of HealthSun’s primary care and specialty centers, along with their vast network of medical centers and care delivery capabilities are likely to boost Anthem’s enrollment in Florida.

Zacks Rank & Stocks to Consider

Anthem presently carries Zacks Rank #3 (Hold).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the industry are Centene Corp (NYSE:CNC) and The Joint Corp (NASDAQ:JYNT) . Both the stocks carry a Zacks Rank #2 (Buy).

Centene is a well diversified, multi-national healthcare company that also delivered positive surprises in each of the last four quarters with an average beat of 10.6%. Shares of Centene have gained 65.7% in a year’s time, outperforming the industry.

Joint Corp develops, owns, operates, franchises, supports and manages chiropractic clinics in the United States. The company has delivered positive surprises in three of the last four quarters with an average beat of 5.5%. Shares of the company have rallied 135% in a year’s time, outperforming the industry.

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