Health Co. Considers Return To I-Rate Swaps Market
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Derivatives

Health Co. Considers Return To I-Rate Swaps Market

Anthem Inc., the fifth-largest publicly traded health benefits provider in the U.S. and the newest member of the Standard & Poor's 500 Index, is considering entering its first interest-rate swap in more than a decade, according to George Martin, treasurer in Indianapolis. He said the company, which issued USD950 million in fixed-rate debt last month, may seek to convert at least a portion of that deal into a synthetic floating-rate obligation. Anthem has a total of USD1.8 billion in outstanding debt.

Any interest-rate swap would be the company's first since 1992. "One-hundred percent of our debt today is in fixed-rate...and the swap market looks attractive," Martin said. "It is always prudent to look at the markets and the interest-rate environment and that is what we're doing."

Shellie Stoddard, an analyst at S&P in New York, said it is more attractive for the company to issue debt now under its new holding company structure, which explains its interest in the swap market. As a result, "I would imagine interest-rate swaps will put them in a better position to reduce their overall rate exposure," she added.

Before it executes a swap, however, Martin said Anthem needs board approval. The potential use of derivatives has not been on the agenda because the board has been preoccupied with Anthem's recent USD4.2 billion acquisition of Trigon Healthcare, which closed earlier this month. "We will get the board to okay us using derivatives for this type of use," he predicted.

Regarding potential counterparties, Martin had a clear warning: "What I don't want is 50,000 calls from people who want to do an interest-rate swap with us."

Anthem replaced another Hoosier State company, troubled insurer Conseco, in the S&P 500 late last month.

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