Aetna Announces Transaction with Vitality Re II
April 28 2011 - 3:14PM
Business Wire
Aetna (NYSE: AET) today announced that, as part of its
long-term capital management strategy, it has entered into a
three-year reinsurance agreement with Vitality Re II Limited. The
agreement allows Aetna to reduce its required capital and provides
$150 million of collateralized excess of loss reinsurance coverage
on a portion of Aetna’s group commercial health insurance
business.1 Vitality Re II is a newly formed insurance company which
issued health insurance-linked notes in a private offering in
connection with this agreement.
“I am pleased to announce the successful completion of our
second transaction, which allows Aetna to free up additional
capital held with respect to the covered business, and deploy it
accretively for other purposes,” said Joseph M. Zubretsky, senior
executive vice president and CFO. “As with Vitality Re, this
transaction provides catastrophic risk protection, improves our
capital efficiency, and reduces our weighted average cost of
capital.”
About Aetna
Aetna is one of the nation’s leading diversified health care
benefits companies, serving approximately 33.8 million people with
information and resources to help them make better informed
decisions about their health care. Aetna offers a broad range of
traditional, voluntary and consumer-directed health insurance
products and related services, including medical, pharmacy, dental,
behavioral health, group life and disability plans, and medical
management capabilities and health care management services for
Medicaid plans. Our customers include employer groups, individuals,
college students, part-time and hourly workers, health plans,
governmental units, government-sponsored plans, labor groups and
expatriates. For more information, see www.aetna.com. To learn more
about Aetna’s innovative online tools, visit
www.aetnatools.com.
1 Amounts payable under the reinsurance agreement are based on
the annual medical benefit ratio (“MBR”) of a portion of Aetna Life
Insurance Company’s group commercial PPO, POS and indemnity
business compared to a threshold attachment point specified in the
reinsurance agreement. The principal amount of the Vitality Re II
notes, which are non-recourse to Aetna, and the coverage available
under the reinsurance agreement will be reduced by any payments to
Aetna under the reinsurance agreement. Aetna will be entitled to
begin to receive payments from Vitality Re II under the reinsurance
agreement if the MBR of the covered business for calendar year 2011
reaches an initial attachment point of 100%. The full $150 million
of coverage would be paid to Aetna if the MBR of the covered
business reaches an initial exhaustion point of 120% for calendar
year 2011. The attachment and exhaustion points will be reset
annually for 2012 and 2013 to maintain modeled probabilities of
attachment and expected loss on the Vitality Re II notes equal to
the initial modeled probabilities of attachment and expected
loss.
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