A.M. Best Affirms Credit Ratings of Aetna, Inc. and Its Subsidiaries; Affirms Credit Ratings of SilverScript Insurance Company
A.M. Best has affirmed the Financial Strength Rating
(FSR) of A (Excellent) and the Long-Term Issuer Credit Ratings
(Long-Term ICRs) of “a” of Aetna Life Insurance Company (ALIC)
(Hartford, CT) and other operating entities of Aetna Inc. (Aetna)
(headquartered in Hartford, CT) [NYSE: AET] following the
announcement on Nov. 28, 2018, that CVS Health Corporation (CVS
Health) has completed its acquisition of Aetna and its insurance
subsidiaries. Concurrently, A.M. Best has affirmed the FSR of A
(Excellent) and the Long-Term ICR of “a” of SilverScript Insurance
Company (SilverScript) (Nashville, TN), a subsidiary of CVS Health.
Additionally, A.M. Best has affirmed the FSR of A- (Excellent) and
the Long-Term ICRs of “a-” of Coventry Health Plan of Florida, Inc.
(Coventry HP of FL) (Sunrise, FL) and Aetna Insurance Company
Limited (AICL) (United Kingdom). Lastly, A.M. Best has affirmed the
Long-Term ICR of “bbb” and the Long-Term Issue Credit Ratings
(Long-Term IR) of Aetna. The outlook of these Credit Ratings
(ratings) is stable. Also, A.M. Best has withdrawn the Short-Term
IR commercial paper rating of AMB-2 of Aetna, as the program has
been terminated due to the merger with CVS Health.
Please see link below for a detailed listing of the companies
The majority of Aetna’s operating entities are part of the core
subsidiaries of Aetna Inc. (Aetna Health & Life Group). The
ratings of Aetna Health & Life Group reflect its balance sheet
strength, which A.M. Best categorizes as very strong, as well as
its strong operating performance, favorable business profile and
appropriate enterprise risk management (ERM). The ratings of
SilverScript reflect its balance sheet strength, which A.M. Best
categorizes as very strong, as well as its strong operating
performance, neutral business profile and appropriate ERM.
The ratings of Aetna Health & Life Group and SilverScript
reflect high financial leverage of approximately 60% and high level
of goodwill at the ultimate parent, CVS Health. In addition, there
is a significant execution risk related to the Aetna-CVS Health
merger given the vertical nature of the transaction and potential
complexity to achieve meaningful synergies. However, CVS Health
stated its intention to maintain the current capitalization level
at the insurance entities and accelerate de-leveraging through
robust cash flow and reduced share repurchases. Following the
announcement of the transaction, Aetna and CVS Health stopped share
repurchases. In 2017, Aetna’s and CVS Health’s share repurchases
totaled $3.85 billion and $4.4 billion, respectively.
Aetna Health & Life Group’s strong risk-adjusted
capitalization is supported through a steady stream of positive
earnings. However, year-end 2017 risk-adjusted capitalization at
ALIC was at its lowest level in five years driven by a higher
dividend to the parent and reduced value of deferred tax asset. The
operating performance of Aetna’s insurance subsidiaries remains
strong, with earnings supported by positive results in all lines of
business and margins exceeding targets in 2017 and through the nine
months of 2018. However, the exit from the individual business,
combined with a loss of Medicaid contracts in several states,
resulted in a material premium decline. Aetna is focused on
maintaining stability of commercial group earnings while profitably
expanding in government programs: Medicare Advantage and Medicaid
Aetna maintains a strong market presence throughout the United
States in commercial and government segments. As a condition of the
merger in order to satisfy the anti-trust concerns, Aetna agreed to
sell all of its stand-alone Medicare Part D business to WellCare
Health Plans Inc. It is not expected to impact Aetna’s operations
significantly, as other Medicare products will not be affected.
Aetna’s strategy of building effective partnerships with providers
to deliver high quality and cost-effective care is supported by the
build-out of an information technology platform to facilitate
data-driven impacts on members’ behavior and lifestyle in order to
control chronic health conditions. While Aetna’s insurance
operation will remain a separate unit, the merger with CVS Health
will provide further opportunities for vertical integration and
outreach to members through increased local presence.
SilverScript has maintained very strong risk-adjusted capital
levels over the past several years, supported by 100% retention of
net income and an absence of dividend payments. Capital and surplus
has shown consistent growth, with a five-year compound annual
growth rate of 28%. These positive balance sheet attributes are
offset partially by potential liquidity concerns resulting from a
high dependency on large program receivable balances, due to the
Centers for Medicare & Medicaid Services (CMS) reconciliation
process and timing of payments. SilverScript has demonstrated a
long-term trend of strong favorable earnings, with a five-year
return on equity exceeding 20%. SilverScript is the market leader
in stand-alone prescription drug plan enrollment; however, more
than 50% of membership is composed of low-income subsidized members
auto-assigned by CMS. Such concentration creates lack of product
diversification and subjects SilverScript to a high degree of
The ratings of AICL reflect its balance sheet strength, which
A.M. Best categorizes as very strong, as well as its marginal
operating performance, limited business profile and appropriate
ERM. Furthermore, the ratings of AICL factor in rating enhancement
from the Aetna organization. AICL has benefited from capital
injections and the transfer of international business from the
A complete listing of Aetna Inc.’s FSRs, Long-Term ICRs and
Long- and Short-Term IRs also is available.
This press release relates to Credit Ratings that have been
published on A.M. Best’s website. For all rating information
relating to the release and pertinent disclosures, including
details of the office responsible for issuing each of the
individual ratings referenced in this release, please see A.M.
Best’s Recent Rating Activity web page. For
additional information regarding the use and limitations of Credit
Rating opinions, please view Understanding Best’s Credit
Ratings. For information on the proper media use of Best’s
Credit Ratings and A.M. Best press releases, please view
Guide for Media - Proper Use of Best’s Credit Ratings and A.M.
Best Rating Action Press Releases.
A.M. Best is a global rating agency and information provider
with a unique focus on the insurance industry. Visit
www.ambest.com for more information.
Copyright © 2018 by A.M. Best Rating
Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.
version on businesswire.com: https://www.businesswire.com/news/home/20181129005837/en/
A.M. BestDoniella PlissAssociate
Director+1 908 439 2200, ext.
SharkeyManager, Public Relations+1 908 439 2200, ext.
ErmakovaSenior Financial Analyst+ 44 20 7397
PeavyDirector, Public Relations+1 908 439 2200, ext.
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