A.M. Best Comments on WellPoint, Inc.'s Proposed Acquisition of WellChoice, Inc.OLDWICK, N.J. -- A.M. Best Co. has commented that WellPoint, Inc.'s (WellPoint) (NYSE NYSE See: New York Stock Exchange : WLP WLP WebLogic Portal (Bea Systems) WLP Wafer Level Packaging WLP Women's Learning Partnership (Bethesda, MD) WLP Workplace Learning & Performance WLP World Library Partnership, Inc. ) (Indianapolis, IN) proposed acquisition of WellChoice, Inc. (WellChoice) (NYSE: WC) (New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of , NY) for $6.5 billion will further strengthen the reach of the largest health care company within the northeast when completed. WellChoice serves over five million members in a market that includes New York City New York City: see New York, city. New York City City (pop., 2000: 8,008,278), southeastern New York, at the mouth of the Hudson River. The largest city in the U.S. , 10 downstate down·state n. The southerly section of a state in the United States. adv. & adj. To, from, or in the southerly section of a state. down counties and selected counties in upstate New York Upstate New York is the region of New York State north of the core of the New York metropolitan area. It has a population of 7,121,911 out of New York State's total 18,976,457. Were it an independent state, it would be ranked 13th by population. . The transaction is expected to be financed with a mix of stock, cash and debt. The resulting debt-to-capital level should be approximately 23% and is expected to remain below WellPoint's maximum stated level of 25%. Pending regulatory approval, the transaction is expected to close in the first quarter 2006. The acquisition is consistent with WellPoint's focused strategy of aligning dedicated businesses and focusing on specific markets. Traditionally, WellPoint's acquisitions have followed a conservative and controlled expansion strategy, with the focus being on key market segments and successful integration. A.M. Best expects WellPoint's track record of successful, conservative and controlled acquisition and integration to continue after the merger. WellPoint's increases in enrollment, diversified sources of earnings, solid capitalization and strong operating cash flows Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. and growth in earnings are expected to continue. WellPoint's diversified revenue sources and consistent profitability reduce its dependence on any one customer or segment, and the merger with WellChoice further accentuates these attributes. A.M. Best's primary concern is WellPoint's growing capital structure exposure to goodwill impairment. WellPoint's continued acquisitions and mergers can continue to grow this exposure, which could negatively impact the firm's capital structure. Debt-to-tangible capital was 78.3% at year-end 2004 and is expected to increase to 91.4% after the close of the WellChoice transaction. A.M. Best expects to conduct a full review of WellChoice prior to close, after which ratings will be assigned to its entities. For Best's Ratings Best's rating A rating A.M. Best Co. assigns to insurance companies based on the company's ability to meet its obligations to its policyholders. , an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings. A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com. |
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