AM Best Comments on Credit Ratings of Elevance Health, Inc. and Its Subsidiaries Following Acquisition Announcement

Rhea-AI Summary

AM Best has confirmed that the Credit Ratings of Elevance Health (NYSE: ELV) and its subsidiaries remain unchanged after the announcement on January 23, 2023 regarding its acquisition of Louisiana Health Service and Indemnity Company, operating as Blue Cross and Blue Shield of Louisiana. BCBSLA serves over 1.9 million members with approximately $1.8 billion in capital. AM Best will monitor the acquisition's progress through legal and regulatory approvals, which may affect Elevance's financial leverage, projected to increase slightly beyond 40%. The acquisition is expected to be accretive to earnings and close in the second half of 2023.

Positive

• Acquisition of BCBSLA expected to be accretive to earnings.
• BCBSLA is well-capitalized with fluctuating but profitable results.
• Acquisition may prompt further transactions within the Blue plans.

Negative

• Elevance's financial leverage expected to rise slightly above long-term target of 40%.
• Uncertainty regarding the approval timeline for the acquisition.

OLDWICK, N.J.--(BUSINESS WIRE)-- 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 below 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.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2023 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230124006087/en/

Jennifer Asamoah

Senior Financial Analyst

+1 908 439 2200, ext. 5203

jennifer.asamoah@ambest.com

Christopher Sharkey

Manager, Public Relations

+1 908 439 2200, ext. 5159

christopher.sharkey@ambest.com

Doniella Pliss

Director

+1 908 439 2200, ext. 5104

doniella.pliss@ambest.com

Al Slavin

Senior Public Relations Specialist

+1 908 439 2200, ext. 5098

al.slavin@ambest.com

Source: AM Best

FAQ

What is the purpose of Elevance Health's acquisition of BCBSLA?

The acquisition aims to expand Elevance's health product portfolio and enhance its earnings profile.

When was the announcement about the acquisition made?

The announcement was made on January 23, 2023.

How many members does BCBSLA serve?

BCBSLA serves over 1.9 million members.

What is the expected timeline for the acquisition to close?

The acquisition is expected to close in the second half of 2023, pending regulatory approval.

What impact will the acquisition have on Elevance's financial leverage?

Elevance's financial leverage is anticipated to increase slightly above its long-term target of 40% due to the acquisition.