MOH – Base Case CDS 152bps, Base Case iCDS 83bps, Negative Case iCDS 155bps, 2028 4.375% Bond YTW of 6.033%, iYTW of 5.103%, Ba3 Rating from Moody’s, IG3+ (equivalent to A1) Rating from Valens, Low Refinancing Need

February 27, 2024

  • Cash bond markets are overstating MOH’s credit risk with a YTW of 6.033% relative to an Intrinsic YTW of 5.103%, while CDS markets are slightly overstating credit risk with a CDS of 152bps relative to an Intrinsic CDS of 83bps. Furthermore, Moody’s is grossly overstating MOH’s fundamental credit risk with its highly speculative Ba3 credit rating eight notches below Valens’ IG3+ (A1) credit rating.
  • Incentives Dictate Behavior™ analysis highlights mostly negative signals for credit holders. As a positive, most management members are material owners of MOH equity relative to their average annual compensation, indicating that they are well-aligned with shareholders to pursue long-term value creation for the company.
  • Earnings Call Forensics™ of MOH’s Q4 2023 earnings call highlights that management is confident the pressure on their medical loss ratio from increases in special enrollment period membership will normalize

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