CNC – Base Case CDS 141bps, Base Case iCDS 91bps, Negative Case iCDS 182bps, 2030 3.375% Bond YTW of 5.642%, iYTW of 4.989%, Ba1 Rating from Moody’s, IG4+ (equivalent to Baa1) Rating from Valens, Low Refinancing Need
March 13, 2025
- Credit markets are slightly overstating CNC’s credit risk with a YTW of 5.642% and a CDS of 141bps relative to an Intrinsic YTW of 4.989% and an Intrinsic CDS of 91bps. Furthermore, Moody’s is overstating CNC’s fundamental credit risk with its Ba1 credit rating three notches below Valens’ IG4+ (Baa1) credit rating.
- Incentives Dictate Behavior™ analysis highlights mostly negative signals for credit holders. As a positive, most management members have low change-in-control compensation relative to their annual compensation, indicating they may not be incentivized to pursue a takeover or accept a sale of the company, decreasing event risk for creditors.
- Earnings Call Forensics™ of the firm’s Q4 2024 (2/4/2024) earnings call highlights that management is confident they are on pace to meet financial objectives such as a 1% margin for the PDP business and that they can sustain the business despite potential competition from premium support tiers.
