Fitch isn't budging on negative outlook for Anthem

Fitch Ratings Inc. is holding to its negative view of Anthem Inc.'s credit rating as the Indianapolis-based health insurer moves forward with its proposed $54.2 billion purchase of rival insurer Cigna Corp.

In a report released Tuesday, Fitch analysts said Anthem's negative ratings watch status reflects the projected effects the Cigna deal will have on its financial leverage, as well as potential short-term earnings disruptions that could occur during the companies' integration.

Anthem, the largest licensee of Blue Cross and Blue Shield, has said it expects the deal to add approximately $22 billion in new debt to its balance sheet.

“Fitch plans to resolve the ratings watch before Anthem accesses the debt markets to partially fund the acquisition,” Fitch analysts said in the report. “If the acquisition proceeds along the terms announced in the merger agreement, Fitch expects to downgrade Anthem's ratings by one notch or to affirm them, most likely with a negative outlook.”

Fitch placed Anthem on a negative ratings watch after its announcement of the planned merger in late July. The merger is expected to close in the second half of 2016.

Fitch analysts said they expect Anthem may need to divest itself of some operations in various products and/or geographic markets in order to gain approval from state and federal regulators, but that those divestitures would not have a meaningful impact on the combined company's financial results.