AM Best Affirms Credit Ratings of Aetna Subsidiaries of CVS Health Corporation; Reviews outlook on key subsidiaries

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OLDWICK, New Jersey, December 16, 2021– (COMMERCIAL THREAD) –AM Best revised the outlook for long-term issuer credit ratings (long-term ICR) from stable to positive and confirmed the financial strength rating (FSR) of A (excellent) and the long-term ICR of “a (Excellent) from Aetna Life Insurance Company (ALIC) (Hartford, CT) and other members of Aetna Health & Life Group, which are operating entities of Aetna Inc. (Aetna) and wholly owned subsidiaries of CVS Health Corporation (CVS Health) [NYSE: CVS]. The outlook for the FSR is stable. Please see below for a detailed list of companies. At the same time, AM Best revised the outlook from stable to positive and confirmed the FSR of A- (Excellent) and the long-term ICR of “a-” (Excellent) of Aetna Insurance Company Limited (AICL) (United Kingdom). United).

AM Best also confirmed the FSR of A (Excellent) and the long-term KPIs of “a” (Excellent) from Texas Health + Aetna Health Insurance Company (Arlington, TX), as well as Texas Health + Aetna Health Plan, Inc. ., (Arlington, TX) (collectively referred to as Texas Health Aetna). In addition, AM Best confirmed the FSR of A (Excellent) and the long-term ICR of “a” (Excellent) of Allina Health and Aetna Insurance Company (St. Louis Park, MN), which are all joint ventures. with subsidiaries of Aetna Inc. The outlook for these ratings is stable.

The positive outlook reflects the improvement in CVS Health’s financial leverage measures and the reduction in concerns about future pressure on the capitalization of the insurance entities of the Aetna Health & Life group due to the high level of indebtedness of the company. mother. Thanks to strong operational gains and annual operating cash flow, CVS Health maintained its repayment plan to reduce its senior debt outstanding. CVS Health has continued to make important milestones in its balance sheet deleveraging plan and, based on its latest public announcement, has paid off approximately $ 21.0 billion in debt since 2018. The company is on track to bring back debt-to-capital ratio at 43.% by end of 2021 and 39% by 2022, as well as a debt-to-EBITDA ratio adjusted to around 3.6 times for 2021. AM Best had seen the initial debt / capital which exceeded 55% at the end of 2018 as a brake on the rating of insurance subsidiaries; however, CVS Health has demonstrated its ability to deleverage thanks to its strong operational performance, while maintaining the capitalization objectives of the Aetna Health & Life group.

The ratings of the Aetna Health & Life group reflect the strength of its balance sheet, which AM Best considers very strong, as well as its strong operational performance, favorable business profile and appropriate enterprise risk management (ERM). The group’s risk-adjusted capital level increased in 2020 and was at its highest level, as measured by the Best Capital Adequacy Ratio (BCAR), as strong earnings were well balanced with dividends paid out. parent company. Growth in the absolute level of capital and surplus has exceeded the rate of premium expansion in 2020 and over the past five years. In addition, a lower share of higher risk investments – commercial mortgages and BA assets – contributed to the improvement in risk-adjusted capitalization. Future deployment of capital is expected to be modest to support CVS Health’s long-term vertical strategy to be a point-of-care healthcare service provider. Any significant acquisition may reduce CVS Health’s financial flexibility, and AM Best will monitor the effects on balance sheet measures accordingly.

Profitable premium growth in recent years has been driven by the expansion of Aetna’s government business in Medicare Advantage (MA) and Medicaid. With emergency declarations still in place throughout the COVID-19 pandemic and rules regarding new determinations of Medicaid beneficiaries, growth in Medicaid business memberships has been strong over the past 18 months. This poses a certain risk of concentration on activities financed by the government; However, the company also tempered the downward trend in memberships in the trade bloc, which continued to decline in 2021, although the decline was offset by a slight increase in memberships in the third quarter. The operating profit trend has been quite favorable over the past two years, where declining claims utilization has resulted in favorable gains during the early stages of the COVID-19 pandemic in 2020. More recently, The company’s medical claims ratio increased through 2021, due to higher than expected COVID-19-related medical costs as treatment and testing costs increased throughout the months. been mid to late.

Aetna remains a major player in the managed care markets across the United States. Aetna has focused on the government segment and has been able to capture an increasing percentage of MA members and increase its market share in this highly competitive segment. The relationship with CVS Health adds a competitive advantage as some Aetna insurance products focus on affiliated MinuteClinics as a low cost primary care service provider. In addition, Aetna has successfully developed a value-based care model across all of its products and geographies, with approximately 70% of claims routed through value-based contracts.

AICL’s ratings reflect the strength of its balance sheet, which AM Best considers very strong, as well as its marginal operational performance, limited business profile and appropriate ERM. In addition, AICL’s ratings take into account the improved ratings of the Aetna organization. AICL remains well capitalized and mitigates the difficult pricing environment in the international private medical insurance segment by focusing on selective underwriting of risks.

Texas Health Aetna’s ratings reflect the strength of its balance sheet, which AM Best considers strong, as well as its adequate operational performance, limited business profile and appropriate ERM. The joint venture exhibited premium growth in 2020 and management expects operating margins to gradually strengthen over time with appropriate increases in product prices.

The ratings of Allina Health and Aetna Insurance Company reflect the strength of its balance sheet, which AM Best considers adequate, as well as its marginal operating performance, limited business profile and appropriate ERM. Medicare Advantage enrollment increased in 2020, resulting in an increase in net premiums; however, results are still lagging behind the original plan. The joint venture is expected to pay off on a subscription basis in a few years as the membership increases.

The FSR of A (Excellent) and the long-term ICRs of “a” (Excellent) were confirmed, with the long-term ICR outlook revised from stable to positive and the FSR outlook held to stable, for the following members of Aetna Health & Life Group:

  • Aetna Life Insurance Company

  • Aetna Health and Life Insurance Company

  • Aetna Life & Casualty (Bermuda) Ltd.

  • Aetna Health Inc. (a Connecticut company)

  • Aetna Health Inc. (a Florida company)

  • Aetna Health Inc. (a Georgia company)

  • Aetna Health Inc. (a Louisiana company)

  • Aetna Health Inc. (a New Jersey company)

  • Aetna Health Inc. (a New York company)

  • Aetna Health Inc. (a Maine company)

  • Aetna Health Inc. (a Pennsylvania company)

  • Aetna Health Inc. (a Texas company)

  • Aetna Health Insurance Company

  • New York Aetna Health Insurance Company

  • Aetna Better Health of Florida, Inc.

  • Aetna Health of California Inc.

  • Aetna Health of Iowa, Inc.

  • Aetna Health of Utah, Inc.

  • Aetna Dental of California Inc.

  • Aetna Dental Inc. (a New Jersey company)

  • Aetna Dental Inc. (a Texas company)

  • American Continental Insurance Company

  • Accendo Insurance Company

  • Continental Life Insurance Company of Brentwood, Tennessee

  • Coventry Health and Life Insurance Company

  • Aetna Better Health Michigan, Inc.

  • Aetna Better Health of Missouri, LLC

  • Coventry Health Care of Illinois, Inc.

  • Coventry Health Care of Kansas, Inc.

  • Coventry Health Care of Florida, Inc.

  • Coventry Health Care of Missouri, Inc.

  • Coventry Health Care of Nebraska, Inc.

  • Coventry Health Care of Virginia, Inc.

  • Coventry Health Care of West Virginia, Inc.

  • First Life and Health Insurance Company

  • HealthAssurance Pennsylvania, Inc.

  • SilverScript Insurance Company

This press release relates to credit ratings published on the AM Best website. For all rating information relating to the release and relevant 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 more information on the use and limits of credit rating opinions, please see Best Credit Score Guide. For more information on the proper use of Best’s credit scores, Best’s preliminary credit reports, and AM Best’s press releases, please see Guide to Proper Use of Best Ratings and Reviews.

AM Best is a global credit rating agency, news publisher, and data analytics provider specializing in the insurance industry. Based in the United States, the company operates in more than 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information visit www.ambest.com.

Copyright © 2021 by AM Best Rating Services, Inc. and / or its affiliates. ALL RIGHTS RESERVED.

See the source version on businesswire.com: https://www.businesswire.com/news/home/20211216005817/en/

Contacts

Wayne Kaminski
Senior Financial Analyst
+1 908 439 2200, ext. 5061
wayne.kaminski@ambest.com

Christophe sharkey
Manager, Public Relations
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Martine Seydoux
Financial Analyst
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martina.seydoux@ambest.com

Jim peavy
Director, Communications
+1 908 439 2200, ext. 5644
james.peavy@ambest.com


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