CNC – Base Case CDS 168bps, Base Case iCDS 66bps, Negative Case iCDS 69bps, 2027 4.250% Bond YTW of 6.023%, iYTW of 4.913%, Ba1 Rating from Moody’s, IG4 (equivalent to Baa2) Rating from Valens, Low Refinancing Need

March 20, 2023

  • Credit markets are overstating CNC’s credit risk with a YTW of 6.023% and a CDS of 168bps relative to an Intrinsic YTW of 4.913% and an Intrinsic CDS of 66bps. Furthermore, Moody’s is overstating CNC’s fundamental credit risk with its Ba1 credit rating two notches below Valens’ IG4 (Baa2) credit rating.
  • Incentives Dictate Behavior™ analysis highlights mostly negative signals for credit holders. However, most management members have low change-in-control compensation relative to their average compensation, indicating they are unlikely to pursue a takeover or accept a sale of the company, decreasing event risk for creditors.
  • Earnings Call Forensics™ of the firm’s Q4 2022 earnings call (02/07/2023) highlights that management generated an excitement marker when saying they launched eligibility likelihood modeling across their Medicaid footprint. In addition, they are confident they can achieve Medicare Advantage results that support members’ needs and that they have strong value-based care relationships. Furthermore, they are confident the firm was selected for 10 key contracts in California and that it will work with the state to improve its health care delivery system. Moreover, they are confident they have a strong plan to support growth into different states and that they expect $6-$9 million of Medicaid growth in 2024.

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