S&P says WellPoint ratings consistent with RightCHOICE merger

Standard & Poor's indicated Friday that WellPoint Health Networks Inc.'s merger with RightCHOICE Managed Care Inc. in a $1.3 billion transaction appears to be consistent with its ratings for WellPoint. Although RightCHOICE is not rated by S&P, S&P said it believes RightCHOICE's earnings and capital base are consistent with the measures used in deriving the ratings on WellPoint.

S&P does not expect WellPoint to increase its total amount of debt significantly from current levels; it should be able to fund the costs of the merger largely through cash, which it will have on hand at the time of closing. No rating actions are being taken on WellPoint at this time. Although this transaction poses some risks, as would be true with any acquisition, RightCHOICE is in good financial condition, and S&P said it believes WellPoint has the management capacity to integrate RightCHOICE into the WellPoint family. The acquisition risks seem to be well balanced by the potential improvement in WellPoint's market position. However, if the expectations and terms of the transaction change, Standard & Poor's will review WellPoint's ratings.

Fitch sees no immediate rating change to WellPoint acquisition of RightCHOICE

Fitch said Friday that WellPoint Health Networks Inc.'s merger with RightCHOICE Managed Care Inc. is consistent with management's stated long-term expansion strategy, which focuses on acquiring concentrated enrollment and established provider networks.

Fitch expects WellPoint to add value to RightCHOICE's existing operations primarily through administrative efficiencies and strong product development capabilities. Fitch's ratings on WellPoint and its subsidiaries are supported by the company's existing superior competitive position in the individual and group health insurance market in California and Georgia, strong and consistent consolidated operating performance, solid capital position and excellent cash flows. Factors that partially offset these positives include the significant regulatory and legal challenges facing the entire managed care industry, all of which have the potential to affect the extent to which industry participants can manage costs and price their products appropriately. In addition, the integration of acquisitions has been a major challenge in the managed care industry.

Fitch cuts Providian senior ratings to BB+ from BBB

Fitch lowered Providian Financial Corp.'s senior debt rating to BB+ from BBB and subordinated debt rating to BB from BBB- on Friday after the company announced its chief executive resigned. Combined with this, Providian also reported substantially lower earnings for the third quarter due to significantly weaker asset quality, which necessitated increased provisioning expenses, Fitch noted. The company's performance has also been impacted by weaker than expected loan growth, and Fitch expects both trends are likely to continue near to intermediate term.

Moody's may cut Utilicorp United ratings

Moody's Investors Service put its Baa1 senior unsecured ratings of GPU Power UK and GPU Power Networks plc and the Baa2 senior unsecured rating of Avon Energy Partners on review for possible downgrade following the announcement Friday of the acquisition of the GPU Power UK/Avon Energy group by Utilicorp United (Baa3), together with a financial partner, for $2.1billion. The rating action is based on Moody's concerns of possible negative implications on GPU Power UK's financial profile as a result of this acquisition. Moody's believes that Utilicorp has paid a full price for the UK company. This and the presence of a financial investor may lead to possible increased dividend demands from the new owners.

The review will also focus on the overall future strategy of GPU Power UK under its new ownership, which may include the prospect for participation in possible further consolidation of distribution businesses in the UK. Any synergies derived from the implementation of such a strategy may well partially offset some of the potential negative implications on GPU Power.

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