AM Best Revises Issuer Credit Rating Outlooks to Stable for Most of CVS Health Corporation’s Aetna Inc. Subsidiaries
August 14 2024 - 9:39AM
Business Wire
AM Best has revised the outlook to stable from positive
for the Long-Term Issuer Credit Rating (Long-Term ICR) and affirmed
the Financial Strength Rating (FSR) of A (Excellent) and the
Long-Term ICRs of “a” (Excellent) of Aetna Life Insurance Company
(ALIC) (Hartford, CT) and the 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 of the FSR is stable. (Please see below
for a detailed listing of the companies.)
The Credit Ratings (ratings) of Aetna Health & Life Group
reflect its balance sheet strength, which AM Best assesses as very
strong, as well as its strong operating performance, favorable
business profile and appropriate enterprise risk management.
The revision of the Long-Term ICR outlooks to stable from
positive reflects continued unfavorable operating trends during the
first half of 2024. These unfavorable operating trends were driven
by increased utilization in the group’s Medicare Advantage
business, higher acuity in Medicaid attributable to the resumption
of redeterminations, and a change in the estimate related to the
individual exchange business risk adjustment accrual for the 2023
plan year recorded in the second quarter of 2024. As a result, CVS
Health has announced a decline in its full-year 2024 profit outlook
for the second straight quarter especially as it relates to the
health care benefits segment (Aetna). Furthermore, the group
continued to grow membership through the first half of 2024,
particularly in Medicare Advantage. AM Best notes that Aetna Health
and Life Group is expected to remain profitable over the near-term,
just not at historical levels. AM Best expects earnings and margins
at the Aetna Health and Life Group to improve in 2025 due to
corrective actions being implemented and return to historical
levels in the medium term.
In addition, unfavorable operating trends could potentially
affect risk-adjusted capitalization as premium growth may outpace
capital and surplus. This could negatively impact risk-adjusted
capitalization, as measured by Best’s Capital Adequacy Ratio
(BCAR). However, the group’s balance sheet strength is expected to
remain very strong, even with a potential decline to its BCAR, and
is supported by adequate liquidity measures, which are strengthened
by access to the Federal Home Loan Bank of Boston at the lead
entity, ALIC. Furthermore, the group exhibits good quality of
capital and currently does not hold any debt.
The ratings of Aetna Health & Life Group reflect the
negative impact from its ultimate parent, CVS Health, which has
elevated financial leverage and goodwill that is not expected to
change materially in the near to medium term. CVS Health’s
financial leverage increased in 2023 following the acquisitions of
Signify Health, Inc. and Oak Street Health, Inc. The operating
challenges in the health care benefits segment (Aetna) could reduce
the amount of dividend payments from the Aetna subsidiaries to the
parent, CVS Health. This may impact CVS Health’s plans to de-lever
or should the need arise, result in the potential issuance of more
debt, increasing financial leverage.
The FSR of A (Excellent) and the Long-Term ICRs of “a”
(Excellent) have been affirmed, with the Long-Term ICR outlooks
revised to stable from positive and the FSR outlook maintained at
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 corporation)
- Aetna Health Inc. (a Florida corporation)
- Aetna Health Inc. (a Georgia corporation)
- Aetna Health Inc. (a Louisiana corporation)
- Aetna Health Inc. (a New Jersey corporation)
- Aetna Health Inc. (a New York corporation)
- Aetna Health Inc. (a Maine Corporation)
- Aetna Health Inc. (a Pennsylvania corporation)
- Aetna Health Inc. (a Texas corporation)
- Aetna Health Insurance Company
- Aetna Health Insurance Company of New York
- 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 corporation)
- Aetna Dental Inc. (a Texas corporation)
- American Continental Insurance Company
- Accendo Insurance Company
- Continental Life Insurance Company of Brentwood, Tennessee
- Coventry Health and Life Insurance Company
- Aetna Better Health of Michigan, Inc.
- Aetna Better Health of Missouri, LLC
- Coventry Health Care of Illinois, Inc.
- Coventry Health Care of Kansas, 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 Health Life & Health Insurance Company
- SilverScript Insurance Company
This press release relates to Credit Ratings that have been
published on AM Best’s website. For all rating information relating
to the release and pertinent 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 additional information
regarding the use and limitations of Credit Rating opinions, please
view Guide to Best's Credit Ratings. For information
on the proper use of Best’s Credit Ratings, Best’s
Performance Assessments, Best’s Preliminary Credit Assessments and
AM Best press releases, please view Guide to Proper Use of
Best’s Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and
data analytics provider specializing in the insurance industry.
Headquartered in the United States, the company does business in
over 100 countries with regional offices in London, Amsterdam,
Dubai, Hong Kong, Singapore and Mexico City. For more information,
visit www.ambest.com.
Copyright © 2024 by A.M. Best Rating
Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.
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Jon Housel Financial Analyst +1 908 882
1898 jon.housel@ambest.com Christopher Sharkey
Associate Director, Public Relations +1 908 882 2310
christopher.sharkey@ambest.com Sally Rosen Senior
Director +1 908 882 2284 sally.rosen@ambest.com Al
Slavin Senior Public Relations Specialist +1 908 882
2318 al.slavin@ambest.com
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