AM Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Rating (Long-Term ICR) of "a+" (Excellent) of the core Blue Cross Blue Shield-branded insurance subsidiaries of Elevance Health, Inc. (Elevance) (Indianapolis, IN) (NYSE:ELV), as well as its branded life insurance subsidiaries. All companies listed above are collectively referred to as Anthem Health. At the same time, AM Best has affirmed the Long-Term ICR of "bbb+" (Good), the Long- and Short-Term Issue Credit Ratings (Long-Term IR; Short-Term IR) of Elevance and the Long-Term IR on the existing surplus notes of Anthem Insurance Companies, Inc. (Indianapolis, IN).

Concurrently, AM Best has affirmed the FSR of A- (Excellent) and the Long-Term ICR of "a-" (Excellent) of the members of UNICARE Life & Health Group (UNICARE), a subsidiary of Elevance.

The outlook of these Credit Ratings (ratings) is stable. See the link below for a detailed listing of the companies and the Long- and Short-Term IRs.

The ratings reflect Anthem Health's balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management (ERM).

Anthem Health's risk-adjusted capitalization is at the strongest level, as measured by Best's Capital Adequacy Ratio (BCAR). The company's risk-adjusted capitalization has trended downward but remains more than sufficient to support the organization's underwriting and investment risks. Anthem Health is the main source of earnings for its parent organization, with dividends ranging from $2.1 billion to $3.5 billion over the past five years. Anthem Health has consistently reported strong underwriting and net income over the past five years, and has produced very favorable results across its diverse set of business lines and in its various core markets through the first nine months of 2022. Profitability remains strong with a return on revenue (ROR) of 4% and a return on equity (ROE) of 24.8%, compared with an ROR of 4-5.3% and an ROE in the 22-30% range between 2017 and 2022.

The group has good geographic diversity, as Elevance operates Blue Cross Blue Shield (BCBS) plans in 14 states, as well as its non-Blue branded with CareMore, AMERIGROUP and UNICARE entities. The group has benefited from strong brand name recognition and a leading market share in the majority of these BCBS states. Additionally, the Elevance companies have a strong presence in the national account/BlueCard market segment and there has been a significant expansion of individual exchange product offerings over the past few years. AMERIGROUP entities operate in an additional 12 states in the Managed Care Medicaid segment, further expanding Anthem's footprint. In addition, various non-regulated business under the Anthem organization, including pharmacy benefit management, complex and home care management and behavioral health administration, add a competitive advantage in all lines of business and allow for cost efficiencies.

Financial leverage at Elevance was close to 40% at the end of the third-quarter 2022 and AM Best expects this financial leverage to moderate slightly through a combination of eliminating existing debt and increases in shareholder equity. Earnings before interest and taxes coverage was solid at over 10 times for 2021 and is expected to stay in the same range for 2022. The holding company maintains ample liquidity, with access to a $4 billion revolving credit facility and a $4 billion commercial paper program, as well as access to Federal Home Loan Bank (FHLB) borrowings through its insurance subsidiaries. Elevance had $675 million in outstanding commercial paper and $265 million of FHLB borrowing as of Sept. 30, 2022. There were no borrowings outstanding at the company's credit facility. Cash flows from operations have been very good over the past five years and exceeded net income levels. Elevance has been active in small and midsize acquisitions over the past three years, expanding its presence in various insurance markets and building stronger non-regulated vertical integration. However, AM Best considers Elevance's goodwill plus intangibles to equity as high, at over 90%, through September 2022. Furthermore, AM Best acknowledges that a portion of the intangibles is the Blue Cross Blue Shield trademarks, which are required to operate as a Blue Cross Blue Shield-branded entity.

Anthem Health's ERM is managed at the ultimate parent level, but it has local functionality as well. The ERM program is well-established and is coordinated at the corporate level. Elevance's ERM is considered appropriate for its risk profile, but has a lower level of sophistication when compared with some of its peers. Risk identification and reporting are completed on a regular basis, and ERM is incorporated into the corporate strategic planning. There is established oversight and monitoring of the ERM program.

The ratings of UNICARE reflect its balance sheet strength, which AM Best assesses as strong, as well as its adequate operating performance, limited business profile and appropriate ERM. The rating also includes the support of its parent. Over the past five years, UNICARE entities have been assuming large volume of Medicaid premium from various Elevance's affiliates. Elevance has contributed capital to support that premium transfer.

A complete listing of Elevance Health Inc.'s FSRs, Long-Term ICRs and Long-Term IRs also is available.

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.

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AM Best Affirms Credit Ratings of Elevance Health, Inc. and Its Subsidiaries