• On 21 May 2013, Moody’s announced rating actions on MBIA Insurance Corp., National Public Finance Guarantee Corp., MBIA Inc. and other related entities. Because of the large number of credits across several asset classes affected by these rating actions, including Moody's-rated securities that are guaranteed or "wrapped" by these companies, ratings appearing on this website may not yet reflect current information. For current information on affected credits, please visit www.moodys.com/fig.
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Announcement:

Moody's affirms Aetna's ratings (senior debt at Baa1); outlook remains stable

Global Credit Research - 26 Mar 2012

Approximately $4.4 billion of rated debt affected

New York, March 26, 2012 -- Moody's Investors Service has affirmed Aetna Inc.'s (Aetna; NYSE: AET) Baa1 senior unsecured debt rating and the A1 insurance financial strength (IFS) rating of its operating subsidiary, Aetna Life Insurance Company (ALIC), following the release of 2011 fourth quarter earnings and 2012 guidance. The outlook on the ratings remains stable.

RATINGS RATIONALE

According to Moody's, the A1 IFS rating reflects Aetna's strong business profile driven by its national presence, solid brand name, and its product diversity, which includes employer group health, life and disability benefits, Medicaid and Medicare Advantage. The rating is also supported by a solid financial profile characterized by its consistent earnings performance, good level of capitalization, and moderate financial leverage. Steve Zaharuk, Moody's Senior Vice President, commented, "Although the economic, political, and regulatory environments continue to cast uncertainty on the healthcare insurance sector, Aetna has reported very strong operating earnings over the last two years while preparing and investing for the challenges of operating in a healthcare reform environment. In the short term we expect to see continued solid results together with improvement in membership growth, an area that has experienced weakness in recent years." The rating agency believes Aetna is well positioned to meet the challenges posed by the Affordable Care Act as a result of the company's geographic and product diversity as well as several strategic acquisitions.

Moody's noted that while Aetna has experienced challenges to its commercial membership during the economic downturn, its large national non-risk membership base remains a strength. In addition, the company's growing Medicaid and Medicare Advantage businesses have helped to offset membership losses in the commercial segment. The rating agency added that net earnings margins, at over 5% for the last two years, have exceeded Moody's expectations and the average earnings for the sector. Moody's also commented that Aetna's recent M&A activity, which has primarily focused on small non-risk businesses that employ technology to develop and promote cost effective health care solutions, was viewed as a credit positive. Mr. Zaharuk stated, "These acquisitions were not capital intensive, did not add significant risk, and provided a diverse non-regulated revenue and earnings stream."

Commenting on Aetna's solid financial flexibility, Moody's said Aetna's adjusted financial leverage at December 31, 2011 of 37.4% was virtually unchanged from year-end 2010, and was within the range anticipated for the company's rating level. While Aetna targets a relatively low $100 million of cash at the parent, the company has good cash flow generation and has consistently upstreamed dividends of over $1 billion per year from its operating subsidiaries. According to the rating agency, a key ratings driver is the level of Aetna's consolidated risk-based capital (RBC) ratio, which the company has consistently managed at 300% of company action level (CAL), which is stronger than some of its larger national peers.

The rating agency stated that the ratings could be upgraded if EBITDA margins remain in the 10% range, if medical membership grows by at least 3% on an annual basis, if adjusted EBITDA interest coverage is at least 11 times, and adjusted debt to capital is at or below 35%. However, if there is a debt financed acquisition that significantly increases financial leverage and involves substantial integration issues, if EBITDA margins fall below 4%, or if there is a decrease in the consolidated risk-based capital ratio below 250%, Moody's said that the ratings may be downgraded.

The principal methodology used in rating Aetna was Moody's Rating Methodology for U.S. Health Insurance Companies, published in May 2011.

The following ratings were affirmed with a stable outlook:

Aetna Inc. -- senior unsecured debt rating at Baa1; senior unsecured debt shelf rating at (P)Baa1; subordinated debt shelf rating at (P)Baa2; preferred stock debt shelf rating at (P)Baa3;

Aetna Life Insurance Company -- insurance financial strength rating at A1; long-term issuer rating at A2.

Aetna Inc., is based in Hartford, CT, and through its subsidiaries provides health and life insurance products primarily to group customers. For the calendar year 2011, the company reported consolidated GAAP revenues of approximately $33.8 billion. As of December 31, 2011 shareholders' equity was approximately $10.1 billion, with medical enrollment of 18.5 million members (excluding standalone Medicare Part D members).

Moody's insurance financial strength ratings are opinions of the ability of insurance companies to pay punctually senior policyholder claims and obligations.

REGULATORY DISCLOSURES

Although this credit rating has been issued in a non-EU country which has not been recognized as endorsable at this date, this credit rating is deemed "EU qualified by extension" and may still be used by financial institutions for regulatory purposes until 30 April 2012. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history. The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Stephen Zaharuk
Senior Vice President
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Robert Riegel
MD - Insurance
Financial Institutions Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's affirms Aetna's ratings (senior debt at Baa1); outlook remains stable
No Related Data.

 

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