S&P puts Anthem on positive watch

Standard & Poor's placed the counterparty credit and financial strength ratings on core insurance subsidiaries of Anthem Inc. on positive watch, and revised the outlook on Anthem Inc. to stable from positive, in response to the announced $16.4 billion merger with WellPoint Health Networks Inc. Anthem Inc. ratings were affirmed.

S&P said it recognizes the potential for an enhanced business position of the combined Blue Cross and Blue Shield organizations, but views the surviving holding company as prospectively weaker relative to the operating companies because of increased debt and intangibles, reducing quality of capital.

The combined entity is expected to rebuild the quality of capital, but uncertainty as to the timing was a driving factor behind S&P's decision to increase the ratings gap between parent and insurance operations to three notches from the current two-notch gap.

On closing, S&P will likely raise the ratings on Anthem's core operating companies core to A+ from A and the ratings on WellPoint are expected to be lowered one notch to BBB+ from A-, all with a stable outlook.

Fitch puts Anthem on watch

Fitch Ratings placed the ratings of Anthem Inc. and subsidiaries on negative watch, following the merger announcement with WellPoint Health Networks Inc., creating the largest health insurance and managed care company in the U.S.

The watch reflects Fitch's view that the combined balance sheet of the two companies will be weakened by the incremental debt required to fund the cash portion of the transaction. The extent to which the additional leverage will limit financial flexibility will become more apparent as the expected close of the transaction approaches in mid-2004. The watch also reflects concern regarding integration issues involved with merging companies of such considerable size.

Fitch believes that the combination, however will provide important benefits to both companies in the form of product design, a much broader multi-state provider network and geographic diversification of earnings, revenues and total enrollment.

S&P puts WellPoint on watch

Standard & Poor's revised the outlook for WellPoint Health Networks Inc.'s other core operating companies to stable from negative, but put the long-term counterparty credit rating of WellPoint Health Networks Inc. on negative watch, on the $16.4 billion merger with Anthem Inc.

S&P recognizes the potential for an enhanced business position of the combined Blue Cross and Blue Shield organizations, but views the surviving holding company as prospectively weaker relative to the operating companies because of increased debt and intangibles, reducing quality of capital.

The combined entity is expected to rebuild the quality of capital, but uncertainty as to the timing was a driving factor behind S&P's decision to increase the ratings gap between parent and insurance operations to three notches from the current two-notch gap.

On closing, S&P will likely raise the ratings on Anthem's core operating companies core to A+ from A and the ratings on WellPoint are expected to be lowered one notch to BBB+ from A-, all with a stable outlook.

Fitch puts WellPoint on watch

Fitch Ratings placed the ratings of WellPoint Health Networks Inc. on negative watch, following the merger announcement with WellPoint Health Networks Inc., creating the largest health insurance and managed care company in the U.S.

The watch reflects Fitch's view that the combined balance sheet of the two companies will be weakened by the incremental debt required to fund the cash portion of the transaction. The extent to which the additional leverage will limit financial flexibility will become more apparent as the expected close of the transaction approaches in mid-2004. The watch also reflects concern regarding integration issues involved with merging companies of such considerable size.

Fitch believes that the combination, however will provide important benefits to both companies in the form of product design, a much broader multi-state provider network and geographic diversification of earnings, revenues and total enrollment.

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