Fitch Ratings downgrades WellPoint

Fitch Ratings said new debt to finance WellPoint's $4.9 billion deal for Amerigroup would weaken key financial measures, and the ratings agency downgraded the insurer's long-term issuer default and issue ratings. The outlook for WellPoint's long-term issuer default rating is negative, the rating agency said.

Fitch lowered WellPoint's long-term issuer default rating to A- and dropped the issue ratings to BBB+, according to a news release.

The New York rating agency also affirmed the AA- rating for the insurer financial strength ratings for WellPoint's operating subsidiaries. Nonetheless, Fitch said the ratings' outlook was negative.

Analysts said WellPoint's recent weak operations, the risks from acquisitions and departure of the company's president and CEO contributed to the negative outlooks. WellPoint must also contend with strong competition for commercial health business, health reform and “concerns related to unsustainable medical cost trends,” the rating agency said.

But the analysis was not all bleak. “WellPoint's ratings continue to be supported by the company's strong and generally stable historical operating performance, very strong competitive position, and good statutory capitalization of its operating subsidiaries,” Fitch said. Analysts also said WellPoint would benefit from the proposed Amerigroup acquisition.