AM Best has affirmed the Financial Strength Rating (FSR) of A- (Excellent) and a Long-Term Issuer Credit Rating (Long-Term ICR) of "a-" (Excellent) of WellPoint Insurance Services, Inc. (WISI) (Honolulu, HI). The outlook for these Credit Ratings (ratings) is stable.

The ratings reflect WISI's balance sheet strength, which AM Best assesses as adequate, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management. In addition, the ratings take into account the support provided by WISI's parent, Elevance Health, Inc. (Elevance Health) (NYSE:ELV).

WISI's risk-adjusted capitalization, as measured by Best Capital Adequacy Ratio (BCAR), improved to the very strong level at year-end 2021. However, AM Best expects WISI's BCAR to decline for 2022, driven mainly by capital contraction due to reserve strengthening for its core lines of business as well as sizeable unrealized loss on the fixed income portfolio. WISI plans the near-term capital growth to be supported through positive earnings and no dividends to the parent company.

AM Best acknowledges the company's considerable financial flexibility through a parent company supported by its commercial paper program, parent company cash and a revolving credit facility. Furthermore, Elevance Health has more-than-sufficient financial strength to provide additional support to WISI if needed. Elevance Health has demonstrated explicit and implicit support of WISI in past years. WISI's importance to the parent has increased in recent years as the volume of business in the core and the cell has expanded. WISI benefits from the parent's operational resources and expertise.

WISI's core operations in the protected cell – Federal Employees Health Benefits Program (FEP) premiums assumed from Elevance Health's health insurance affiliates – continue to drive revenue and earnings for the company. The core corporate insurance lines of business – workers' compensation and excess managed care errors and omission (E&O) – have posted fluctuating operating results, including losses in the past three years. These results have been driven in part by fluctuations in claims severity and increases in coverage limits, which resulted in the need for reserve strengthening in recent years, including sizeable reserve increases through 2022. WISI expects the consolidated financial performance of the company to be stable in the current year.

WISI is a Hawaii-domiciled captive and a wholly owned subsidiary of Elevance Health. WISI was established close to two decades ago primarily for the purpose of formalized self-insurance and an instrument of corporate risk management. In the past several years, Elevance Health expanded the volume of E&O coverage placed with WISI as the market for this line of business has hardened considerably. In addition, five years ago, WISI established a segregated cell to assume FEP health care premium from Elevance Health affiliates to optimize capital at statutory entities. Furthermore, the cell structure provides a formal separation of FEP from other WISI business, provides transparency for Hawaii's regulators and allows for potential future WISI expansion into assuming other health lines.

AM Best remains the leading rating agency of alternative risk transfer entities, with more than 200 such vehicles rated in the United States and throughout the world. For current Best's Credit Ratings and independent data on the captive and alternative risk transfer insurance market, please visit www.ambest.com/captive.

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 WellPoint Insurance Services, Inc.