MOH – Base Case CDS 194bps, Base Case iCDS 85bps, Negative Case iCDS 130bps, 2028 4.375% Bond YTW of 6.496%, iYTW of 4.816%, Ba3 Rating from Moody’s, IG3+ (equivalent to A1) Rating from Valens, Low Refinancing Need
- Cash bond markets are materially overstating MOH’s credit risk with a YTW of 6.496% relative to an Intrinsic YTW of 4.816%, while CDS markets are overstating credit risk with a CDS of 194bps relative to an Intrinsic CDS of 85bps. 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. That said, 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 the firm’s Q1 2023 earnings call (4/27/23) highlights that management is confident they continue to have a strong MCR ratio, that pricing trends are completely in-line with expectations, and that their Medicare book remains stable. In addition, they are confident the mix effect of impacted membership cohorts dampens any impact from redeterminations.