December 3, 2018

Ratings agency assigns 'A' rating to Aetna's credit outlook

Flickr Creative Commons | Chez Julius Livre 1
Flickr Creative Commons | Chez Julius Livre 1
Aetna headquarters in Hartford.

Hartford health insurer Aetna has a strong long-term credit outlook in the wake of being acquired by CVS Health last week for $69 billion, a New Jersey credit rating agency said.

A.M. Best recently assigned an "A" rating to Aetna's financial strength and long-term issuer credit rating.

The positive outlook, the agency said, is driven by Aetna's strong operating performance, favorable business profile and well-managed risk management.

"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," the agency said.

But Aetna's exit as an individual business, in addition to losses of Medicaid contracts in several states, has caused a premium decline, A.M. said. Still, Aetna is looking to maintain commercial group earnings while expanding its Medicare Advantage and Medicaid managed care businesses, it said.

As part of it satisfying U.S. Justice Department concerns under the CVS deal, Aetna agreed to divest its standalone Medicare Part D prescription drug plan business, which covers about 2.2 million members, to WellCare Health Plans Inc.

The divestiture is not expected to impact Aetna's operations significantly, and other Medicare products are also not expected to suffer from the sale, the agency said.

CVS CEO Larry J. Merlo said the Rhode Island-based pharmacy giant's buyout of Aetna "marks the start of a new day in health care," where insurers and pharmacy benefit managers are teaming to offer a simpler, more affordable healthcare model for consumers.

Read more

CVS provides more hints of reimagined health care post Aetna merger

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