AM Best has affirmed the Financial Strength Rating (FSR)
of A (Excellent) and the Long-Term Issuer Credit Ratings (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, while the outlook of
the Long-Term ICR is positive. (Please see below for a detailed
listing of the companies.)
Concurrently, AM Best has affirmed the FSR of A (Excellent) and
the Long-Term ICR of “a” (Excellent) of Allina Health and Aetna
Insurance Company (Allina Health) (St. Louis Park, MN). Allina
Health is a joint venture with subsidiaries of Aetna Inc. The
outlook of these Credit Ratings (ratings) is stable.
In addition, AM Best has affirmed the FSR of A (Excellent) and
the Long-Term ICRs of “a” (Excellent) of Texas Health + Aetna
Health Insurance Company, as well as Texas Health + Aetna Health
Plan Inc. Both companies are domiciled in Arlington, TX, and
collectively are referred to as Texas Health Aetna. The outlook of
these ratings is stable. At the same time, AM Best has withdrawn
the ratings of Texas Health Aetna as the companies have requested
to no longer participate in AM Best’s interactive rating
process.
The 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 (ERM).
The positive outlook on the Long-Term ICR for Aetna Health &
Life Group reflects the group’s risk-adjusted capitalization, which
remains at the strongest level, as measured by its Best Capital
Adequacy Ratio (BCAR). Capital and surplus has grown steadily
despite large annual dividend payments in each of the past five
years. The growth in absolute capital is reflected in the group's
five-year compound annual growth rate of 7.6%. The risk profile of
the investment portfolio has improved over time, as there has been
a reduction in the holdings in several asset classes over the past
few years, including commercial mortgages and equities, as well as
the allocation to Class 2 and below investment grade bonds.
Additionally, the balance sheet strength is supported by
adequate liquidity measures, which are strengthened by access to
the Federal Home Loan Bank of Boston at the lead entity, ALIC.
Aetna Life & Health Group has moderate reinsurance leverage and
its reinsurance arrangements differentiates Aetna from its health
insurance peers. In addition to traditional reinsurance with highly
rated carriers, Aetna Health & Life Group maintains a quota
share reinsurance agreement with Health Re Inc. and subsequent
excess of loss protection by Vitality Re entities. Furthermore, the
group exhibits good quality of capital and currently does not hold
any debt.
Over the past few years, favorable development in net premium
has been driven by membership growth in the commercial, Medicare
Advantage and Medicaid managed care product lines. While premium
growth is expected to continue for commercial and Medicare
Advantage over the near term, it will be offset partially by
declines in Medicaid membership in 2023 and the first half of 2024
due to the resumption of redeterminations following the end of the
public health emergency. Premium growth has impacted operating
earnings trends positively over the past few years. Aetna Health
& Life Group has reported underwriting and net income exceeding
$2 billion in each of the past five years with return on revenues
at or exceeding 5% and return on equity exceeding 20%. The group
reported an increase in underwriting income through year-end 2022;
however, it noted an increase in claims driven by increased
utilization in its Medicare Advantage segment, a trend that began
in 2023, and is expected to continue into 2024. Moreover,
investment income has been steady over the past five years and is
expected to improve in 2023 and 2024 due to the interest rate
environment. Investment income has meaningfully contributed to net
earnings.
Aetna is one of the leading players in the managed care markets
offering products throughout the United States. While Aetna’s
Medicare Advantage and Medicaid managed care markets have
experienced significant membership growth over the past few years,
Aetna remains competitive and continues to gain enrollment in other
segments.
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. While the financial
leverage at CVS Health has declined substantially since the
acquisition of Aetna, financial leverage increased modestly at
year-end 2023, driven by the acquisitions of Signify Health Inc.
and Oak Street Health Inc. Signify Health adds in-home health care
to the CVS Health organization, while Oak Street Health is a
leading multi-payer, value-based primary care company.
Goodwill-to-shareholders equity increased over the prior year and
exceeded 110% at year-end 2023. While the acquisitions of Oak
Street and Signify Health are part of the organization’s health
care services strategy, AM Best recognizes the inherent execution
risk within these transactions. Over the near term, there may be
pressure from additional business expansion related to
acquisitions.
The ratings of Allina Health reflect its balance sheet strength,
which AM Best assesses as adequate, as well as its marginal
operating performance, limited business profile and appropriate
ERM. In 2022, Allina Health marked its first year of underwriting
gains since inception. However, the company continues to report net
losses as underwriting gains were not sufficient to offset the
amortization of intangible assets. In recent years, premium growth
has trended favorably in Medicare Advantage products, while
commercial products have increased modestly.
The ratings of Texas Health Aetna reflect its balance sheet
strength, which AM Best assesses as strong, as well as its adequate
operating performance, limited business profile and appropriate
ERM. Texas Health Aetna was supported by the strongest level of
risk-adjusted capitalization, as measured by BCAR. Underwriting
results have been favorable in four of the past five years and net
income turned positive in 2022 as the amortization of intangibles
concluded.
The FSR of A (Excellent) and the Long-Term ICRs of “a”
(Excellent) have been affirmed, with a stable outlook for the FSR
and a positive outlook for the Long-Term ICRs, 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.
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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,
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