A.M. Best Affirms Ratings of Aetna Inc. and Its Subsidiaries
June 27 2011 - 3:52PM
Business Wire
A.M. Best Co. has affirmed the financial strength rating
(FSR) of A (Excellent) and issuer credit ratings (ICR) of “a+” of
the insurance and health maintenance organization (HMO)
subsidiaries of Aetna Inc. (Aetna) (NYSE: AET).
Concurrently, A.M. Best has affirmed the FSR of A (Excellent) and
ICR of “a” of Aetna Insurance Company of Connecticut. A.M.
Best also has affirmed the ICR of “bbb+” and debt ratings of Aetna.
Additionally, A.M. Best has assigned a debt rating of “bbb+” to the
$500 million 4.125% senior unsecured notes, due 2021 of Aetna. The
outlook for all ratings is stable. All the above companies are
headquartered in Hartford, CT. (See below for a detailed listing of
the companies and ratings.)
The rating affirmations of the lead operating entity, Aetna
Life Insurance Company (ALIC), and the insurance and HMO
subsidiaries of Aetna reflect their excellent operating and net
income, good liquidity and solid risk-based capitalization levels.
Aetna continues to generate good operating and net income results,
which mainly are due to strong underwriting gains in the health
care segment. Health care earnings were driven by favorable medical
utilization rates in 2010. Aetna maintains a good level of
liquidity through parent company cash, subsidiary dividends, an
untapped $1.5 billion credit facility and its commercial paper
program. The consolidated Aetna insurance operations’ favorable net
income has contributed to the group’s solid capital level through
retained earnings. The consolidated organization, driven by ALIC,
has a strong risk-based capital ratio, and its capital and surplus
level is more than adequate for the ratings.
Partially offsetting these positive rating factors is the
decline in Aetna’s consolidated membership over the near term as
commercial employer groups continue to be negatively affected by
the state of the economy. This negative affect has pressured
enrollment and premium growth in this business segment due to
in-group disenrollment resulting from layoffs, decreased sales of
complementary products and pricing pressures as employers look to
contain benefit costs. Furthermore, growth in Aetna’s Medicare
lines had been hindered by the Centers for Medicare and Medicaid
Services’ imposed freeze on the plan, prohibiting it to actively
market Medicare Advantage products in April 2010. While this did
not affect the existing enrollees, the effect has obviously
prevented growth in Aetna’s membership for the January 2011 selling
season. The sanctions against Aetna have since been lifted, and the
plan will begin to actively enroll beneficiaries beginning in July
2011. Additionally, the company announced agreements to acquire
Prodigy Health Group on April 28, 2011, and on June 13, 2011, the
Medicare Supplement business of Genworth Financial, Inc.,
which includes Continental Life Insurance Company of Brentwood,
Tennessee and its subsidiary, American Continental Insurance
Company. The acquisitions may result in an increase in its
debt-to-capital, should Aetna issue debt or utilize its commercial
paper program to fund these acquisitions. A.M. Best expects Aetna’s
debt-to-capital to be in the range of or near 30% over the medium
term.
The FSR of A (Excellent) and the ICR of “a+” have been affirmed
for the following subsidiaries of Aetna Inc.:
- Aetna Life Insurance
Company
- Aetna Life & Casualty (Bermuda)
Ltd.
- Aetna Health Inc. (a Connecticut
corporation)
- Aetna Health Inc. (a Florida
corporation)
- Aetna Health Inc. (a Georgia
corporation)
- Aetna Health Inc. (a Maine
corporation)
- Aetna Health Inc. (a New Jersey
corporation)
- Aetna Health Inc. (a New York
corporation)
- Aetna Health Inc. (a Pennsylvania
corporation)
- Aetna Health Inc. (a Texas
corporation)
- Aetna Health Insurance Company of
New York
- Aetna Health Insurance
Company
- Aetna Health of California
Inc.
- Aetna Dental Inc. (a New Jersey
corporation)
- Aetna Dental Inc. (a Texas
corporation)
- Aetna Dental of California
The following debt ratings have been affirmed:
Aetna Inc.—
-- “bbb+” $750 million 6.0% of senior unsecured notes, due
2016
-- “bbb+” $500 million 6.5% of senior unsecured notes, due
2018
-- “bbb+” $800 million 6.625% of senior unsecured notes, due
2036
-- “bbb+” $700 million 6.75% of senior unsecured notes, due
2037
-- “bbb+” $750 million 3.95% of senior unsecured notes, due
2020
-- AMB-2 on commercial paper
The following indicative ratings on universal shelf securities
have been affirmed:
Aetna Inc.—
-- “bbb+” on senior unsecured debt
-- “bbb” on subordinated unsecured debt
-- “bbb-” on preferred stock
The principal methodology used in determining these ratings is
Best’s Credit Rating Methodology -- Global Life and Non-Life
Insurance Edition, which provides a
comprehensive explanation of A.M. Best’s rating process and
highlights the different rating criteria employed. Additional key
criteria utilized include: “Rating Health Insurance Companies”;
“Understanding BCAR for Life and Health Insurers”; “Understand
Universal BCAR”; “Risk Management and the Rating Process for
Insurance Companies”; “Rating Members of Insurance Groups”; “Rating
Commercial Paper”; “Assessing Country Risk”; and “A.M. Best’s
Ratings & the Treatment of Debt.” Methodologies can be found at
www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is the world’s oldest and
most authoritative insurance rating and information source. For
more information, visit www.ambest.com.
Copyright © 2011 by A.M. Best Company,
Inc. ALL RIGHTS RESERVED.
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