Aetna Takes Over Prodigy - Analyst Blog
June 30 2011 - 8:30AM
Zacks
Aetna Inc. (AET) has recently revealed that it
has completed the acquisition of Prodigy Health Group, which was
announced back in April.
New York-based Prodigy sells self funded plans to employers that
employ about 100-5000 individuals. The acquisition, valued at $600
million, will add Prodigy’s self funded market to Aetna’s
domain.
Self-funded plans are the ones in which employers assumes the
risk and pay the claims, and the job of the insurer is limited to
administering the whole process. Prodigy’s market spans across 15
states in the U.S. Through this market, Aetna plans to strengthen
its position in the small-to-mid-sized segment by offering
Administrative Services Only plans, which have become popular of
late with higher premium levels charged by insurance companies.
During January, Aetna completed the purchase of Medicity, a
health information exchange technology company. On June 13, Aetna
announced that it would acquire the Medicare Supplement business of
Genworth Financial, Inc., which includes Continental Life Insurance
Company of Brentwood, Tennessee and its subsidiary American
Continental Insurance Company.
We note that Aetna continues to have an active merger and
acquisition (M&A) pipeline. Moreover, with a wide-ranging
M&A strategy, the company has not limited itself to gaining
scale in the commercial business or strengthening foothold in some
other customer end markets like Medicaid or Medicare. The company
will consider strategies like Medicaid business expansion, new
customer market segments innovation, or medical cost control for
future growth. Given the low visibility around Aetna’s 2011-2012
EPS due to the Health Care reform, we believe this approach will
help the company gear up for long-term growth.
Aetna, which has about 36 million members, boasts of an
excellent operating and net income, good liquidity and solid
risk-based capitalization levels. Earlier during the week, the
rating agency A.M.Best affirmed the financial strength rating (FSR)
of “A” (Excellent) and the issuer credit rating (ICR) of “a+” on
the insurance and health maintenance organization subsidiaries of
Aetna. The rating agency also affirmed the ICR of “bbb+” and debt
ratings of the company. All the ratings carried a stable
outlook.
Aetna competes closely with UnitedHealth Corp.
(UNH), Wellpoint Inc. (WLP), CIGNA
Corp. (CI), and Humana Inc.
(HUM).
AETNA INC-NEW (AET): Free Stock Analysis Report
CIGNA CORP (CI): Free Stock Analysis Report
HUMANA INC NEW (HUM): Free Stock Analysis Report
UNITEDHEALTH GP (UNH): Free Stock Analysis Report
WELLPOINT INC (WLP): Free Stock Analysis Report
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