AM Best has affirmed the Financial Strength Rating (FSR)
of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term
ICR) of “a” of Aetna Life Insurance Company (ALIC) (Hartford, CT)
and the other operating entities of Aetna Inc. that are now
wholly-owned subsidiaries of CVS Health Corporation (CVS Health)
[NYSE: CVS]. These entities include the members of Aetna Health
& Life Group. Concurrently, AM Best has affirmed the FSR of A-
(Excellent) and the Long-Term ICR of “a-” Aetna Insurance Company
Limited (AICL) (United Kingdom). The outlook of these Credit
Ratings (ratings) is stable.
AM Best also has affirmed the FSR of A (Excellent) and the
Long-Term ICR of “a” of Texas Health + Aetna Health Insurance
Company and Texas Health + Aetna Health Plan, Inc., (collectively
Texas Health Aetna), and the Allina Health and Aetna Insurance
Company, both of which are joint ventures with subsidiaries of
Aetna Inc. The outlook of these ratings is stable.
Additionally, AM Best has withdrawn the FSR of A- (Excellent)
and the Long-Term ICR of “a-” of Coventry Health Plan of Florida,
Inc. (Coventry HP of FL) (Sunrise, FL) as the company ceased
writing business.
Lastly, AM Best also has withdrawn the Long-Term ICR of “bbb”,
along with the Long Term Issue Credit Ratings (Long-Term IRs) and
indicative Long-Term IRs on the universal shelf registration of
Aetna Inc. (headquartered in Hartford, CT). Following Aetna Inc.’s
merger with a wholly-owned subsidiary of its ultimate parent, CVS
Health, CVS Health assumed Aetna Inc.’s debt. Aetna Inc. no longer
issues financial statements. (Please see link below for a detailed
listing of the companies and ratings.)
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 AM Best categorizes as very strong, as well as its
strong operating performance, favorable business profile and
appropriate enterprise risk management (ERM).
The ratings reflect Aetna Health & Life Group’s very strong
level of risk-adjusted capitalization, which is offset by a trend
of high dividend payments that have exceeded $2 billion in each of
the past three years, as the entities tend to dividend a large
percentage of earnings. AM Best considers the group’s operating
performance to be strong with return on equity measures annually
exceeding 20% and underwriting income greater than $2 billion per
year. Aetna’s parent, CVS Health, is projecting post-merger
cost-savings synergies of at least $400 million in 2019 and
approximately $800 million in additional savings forthcoming in
2020. Aetna Health & Life Group reported growth in net premiums
in 2018 after a decline in 2017 and flat premium in the few years
prior. AM Best notes that this group has reported consistent
increase in Medicare Advantage premiums with double-digit growth.
Some of this favorability is offset by losses in commercial fully
insured business. Furthermore, SilverScript Insurance Company, a
member of the Aetna Health & Life Group, remains the leading
standalone Part D plan in the U.S. based on market share.
Aetna is one of the top health insurers in the U.S. market, and
total medical membership has increased to 22.8 million individuals
for commercial, Medicare and Medicaid products. Aetna's Medicare
Advantage membership growth has outpaced the industry over the past
five years, moving Aetna from the fifth to the third position in
the Medicare Advantage market. The share of members in plans with a
Star rating of 4.5 or higher exceeds peers and the industry
average. The company also has recently reported strong membership
growth in Medicare Supplement and Medicaid managed care business.
In 2019, membership in Aetna’s commercial business has been
relatively flat; however, it has reported a decline in its insured
membership within that business, which has been partially offset by
growth in its administrative services contract business.
The ratings of Aetna Health & Life Group reflect high
financial leverage and goodwill at the ultimate parent, CVS Health.
Financial leverage at the end of third quarter 2019 was
approximately 52%. While that is considered high, it remains lower
than year-end 2018 as the CVS Health organization is focused on
de-leveraging. 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, which it
has done. Furthermore, CVS Health has accelerated de-leveraging
through robust cash flow and suspended its share repurchase
program.
The ratings of AICL reflect its balance sheet strength, which AM
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 wider
group.
The ratings of the Allina Health and Aetna Insurance Company
joint venture reflect its balance sheet strength, which AM Best
categorizes as very strong, as well as its marginal operating
performance, limited business profile and appropriate ERM.
The ratings of Texas Health Aetna reflect its balance sheet
strength, which AM Best categorizes as very strong, as well as its
adequate operating performance, limited business profile and
appropriate ERM.
A complete list of Aetna Inc.’s subsidiaries’ FSRs, Long-Term
ICRs and Long Term IRs also is available.
This press release relates to Credit Ratings that have been
published on AM 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 AM 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 AM Best press releases, please view Guide
for Media - Proper Use of Best’s Credit Ratings and AM Best Rating
Action Press Releases.
AM Best is a global credit rating agency, news publisher and
data provider specializing in the insurance industry. The company
does business in more than 100 countries. Headquartered in Oldwick,
NJ, AM Best has offices in cities around the world, including
London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For
more information, visit www.ambest.com.
Copyright © 2019 by A.M. Best Rating
Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.
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version on businesswire.com: https://www.businesswire.com/news/home/20191121005972/en/
Wayne Kaminski Senior Financial Analyst +1 908
439 2200, ext. 5061 wayne.kaminski@ambest.com
Valeria Ermakova Senior Financial Analyst +44
20 7397 0269 valeria.ermakova@ambest.com
Christopher Sharkey Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com
Jim Peavy Director, Public Relations +1 908 439
2200, ext. 5644 james.peavy@ambest.com
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