Moody’s turns Elevance view to positive

Moody’s Investors Service said it changed its outlook for Elevance Health, Inc. to positive from stable and affirmed its Baa2 senior unsecured debt ratings.

“The change to a positive outlook reflects the improvement in several key ratings factors since Gail Boudreaux became CEO in 2017. Elevance has become more diverse by building out its health services business, Carelon, as well as adding a significant level of non-regulated cash flows. Health services earnings were approximately 30% from basically nothing in 2017.

“Earnings growth has also notably accelerated. The annual EBITDA growth rate averaged 10.4% in the six years since 2017 compared to 4.2% in the six years prior to 2017. Cash flow coverage and EBITDA coverage, though still below the upgrade trigger of 13x, have both improved notably and leverage has declined.

“Moody's notes, however, that Elevance currently is navigating challenges including membership pressure from the Medicaid redetermination process. Driven by Medicaid redeterminations, membership declined in 2023 and management is forecasting another decline in 2024. Furthermore, there has been sub-par performance in Medicare Advantage.

“For example, the 2024 star ratings for Medicaid Advantage (MA) declined significantly in 2024 and will adversely impact revenue by $500 million in 2025. Failure to improve performance in these areas over the next 12-18 months would make an upgrade less likely,” the agency said in a press release.

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