A.M. Best Affirms Ratings of WellPoint, Inc. and Its Subsidiaries; Revises Outlook to Stable

A.M. Best Co. has affirmed the financial strength ratings (FSR), issuer credit ratings (ICR) and debt ratings of WellPoint, Inc. (WellPoint) (Indianapolis, IN) (NYSE: WLP) and its insurance subsidiaries. The outlook for some of these ratings has been revised to stable from positive.

In addition, A.M. Best has assigned an FSR of A (Excellent) and ICR of “a+” to Anthem Blue Cross Blue Shield Partnership Plan, Inc. (Mason, OH). Concurrently, A.M. Best has assigned an FSR of A- (Excellent) and ICRs of “a-” to UNICARE Health Insurance Company of Texas (Houston, TX), UNICARE Health Plan of Kansas, Inc. (Topeka, KS) and UNICARE Health Plan of West Virginia, Inc. (Charleston, WV). The outlook assigned to these ratings is stable.

Concurrently, A.M. Best has withdrawn the FSRs of A- (Excellent) and ICRs of “a-” and assigned a category NR-3 (Rating Procedure Inapplicable) to OneNation Insurance Company (Indianapolis, IN) and HealthLink HMO, Inc. (St. Louis, MO) due to the decline in premiums written by both companies. (See link below for a complete listing of the companies and ratings.)

The ratings of the insurance subsidiaries of WellPoint reflect the organization’s large membership base, geographical diversified sources of earnings, as well as its strong earnings and operating cash flows. WellPoint experienced several years of expansion through mergers and acquisitions. The company has become one of the largest health insurers in the United States and serves approximately 35 million medical members. WellPoint has expanded into markets outside traditional managed care delivery, which has created diversified revenue sources and consistent profitability. The organization has effectively reduced dependence on any one customer or segment. Earnings and operational cash flows have been strong and in recent periods have provided a source of funding for smaller acquisitions of companies. While the level of capitalization has declined at these entities during the past few years, WellPoint’s average level of risk-based capital is still above that of other for profit companies. Additionally, WellPoint’s current level of liquidity at the holding company is sufficient to service its debt.

Offsetting factors include WellPoint’s capital exposure to goodwill impairment and the challenges of membership and earnings growth in a highly competitive and regulated environment. Although healthcare companies are limited in terms of acquisitions, WellPoint may continue to acquire small to mid-sized businesses and potentially grow this exposure, which could negatively impact the firm’s capital structure. Debt-to-tangible capital was 96.4% and total debt to capital and surplus was 28.2% as of December 31, 2007. Organic membership growth appears to have slowed from recent economic conditions and increased competition. A.M. Best has concerns regarding the organization’s growth potential, especially in the highly competitive commercial market, without acquisitions.

For a complete listing of WellPoint Corporation’s FSRs, ICRs and debt ratings, please visit www.ambest.com/press/032005wellpoint.pdf.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.