AETNA A.M. Best has assigned a debt rating of “bbb+” to the 10-year, $750 million 3.50% senior unsecured notes to be issued by Aetna Inc. (Aetna) (Hartford, CT) [NYSE:AET]. The outlook assigned to the rating is stable.
The net proceeds are expected to be used to redeem all of the issuer’s outstanding 6.50% senior notes due September 2018 and for general corporate purposes. Aetna’s pro forma financial leverage and goodwill and intangibles to equity ratio are high relative to similarly rated peers. A.M. Best expects debt to capital to be managed to levels at or near 35% in 2015 and notes that interest coverage remains strong at more than 10 times. Additionally, Aetna maintains solid financial flexibility due to its untapped $2.0 billion credit facility, steady dividend streams from its insurance entities and regulated and unregulated cash flows from its insurance and non-insurance operations, respectively.
The recently announced acquisition of bswift, a Chicago-based technology company, is consistent with Aetna’s proprietary exchange strategy and will assist the organization in meeting the needs of consumers as health care shifts to a retail model. A.M. Best does not expect the bswift acquisition to have a material financial impact on Aetna in the near to medium term.
A.M. Best views favorably Aetna’s positive growth trends in membership and revenue through the third quarter of 2014, despite the challenging operating environment. Additionally, the company’s earnings have been bolstered by strong results in its government business, Coventry synergies, disciplined expense management and favorable underwriting results in its life and disability lines.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Key insurance criteria reports utilized:
- Analyzing Insurance Holding Company Liquidity
- Insurance Holding Company and Debt Ratings
- Risk Management and the Rating Process for Insurance Companies
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