AM Best Revises Issuer Credit Rating Outlooks to Stable for Most of CVS Health Corporation’s Aetna Inc. Subsidiaries
AM Best has revised the outlook to stable from positive for the Long-Term Issuer Credit Rating (Long-Term ICR) of Aetna Life Insurance Company and other Aetna Inc. subsidiaries, wholly owned by CVS Health (NYSE: CVS). The Financial Strength Rating (FSR) of A (Excellent) was affirmed. The revision reflects unfavorable operating trends in the first half of 2024, driven by:
- Increased utilization in Medicare Advantage
- Higher acuity in Medicaid due to redeterminations
- Changes in individual exchange business risk adjustment accrual
These factors led CVS Health to lower its full-year 2024 profit outlook. Despite expected near-term profitability, earnings are projected to improve in 2025 due to corrective actions. The ratings consider Aetna's very strong balance sheet, strong performance, favorable business profile, and appropriate risk management.
AM Best ha rivisto l'outlook da positivo a stabile per il Long-Term Issuer Credit Rating (Long-Term ICR) della Aetna Life Insurance Company e di altre sussidiarie di Aetna Inc., interamente possedute da CVS Health (NYSE: CVS). La Financial Strength Rating (FSR) di A (Eccellente) è stata confermata. La revisione riflette tendenze operative sfavorevoli nella prima metà del 2024, trainate da:
- Aumento dell'utilizzo nel Medicare Advantage
- Maggiore gravità in Medicaid a causa delle riesaminazioni
- Cambiamenti nell'accumulo dei rischi dell'industria delle assicurazioni individuali
Questi fattori hanno portato CVS Health a ridurre le previsioni di profitto per l'intero anno 2024. Nonostante un'aspettativa di redditività a breve termine, si prevede che gli utili miglioreranno nel 2025 grazie a misure correttive. Le valutazioni considerano il bilancio molto solido di Aetna, le ottime performance, il profilo aziendale favorevole e la gestione dei rischi appropriata.
AM Best ha revisado la perspectiva de positiva a estable para la Calificación Crediticia de Emisor a Largo Plazo (Long-Term ICR) de Aetna Life Insurance Company y otras subsidiarias de Aetna Inc., totalmente propiedad de CVS Health (NYSE: CVS). La Calificación de Fortaleza Financiera (FSR) de A (Excelente) fue afirmada. La revisión refleja tendencias operativas desfavorables en la primera mitad de 2024, impulsadas por:
- Aumento de la utilización en Medicare Advantage
- Mayor gravedad en Medicaid debido a la reconsideración
- Cambios en la acumulación de ajustes de riesgo del negocio de intercambio individual
Estos factores llevaron a CVS Health a reducir su perspectiva de ganancias para todo el año 2024. A pesar de la rentabilidad esperada a corto plazo, se proyecta que las ganancias mejoren en 2025 debido a acciones correctivas. Las calificaciones consideran el balance muy sólido de Aetna, su fuerte desempeño, su perfil empresarial favorable y una gestión adecuada del riesgo.
AM Best는 Aetna 생명 보험 회사와 기타 Aetna Inc. 자회사의 장기 발행자 신용 등급(Long-Term ICR)의 전망을 긍정적에서 안정적으로 수정하였습니다. A (우수)인 재무 건전성 등급(FSR)이 확인되었습니다. 이번 수정은 2024년 상반기 불리한 운영 동향을 반영합니다, 이는 다음에 의해 주도되었습니다:
- 메디케어 어드밴티지 이용 증가
- 재심사로 인한 메디케이드 중증도 증가
- 개인 교환 사업의 위험 조정 적립 변경
이러한 요소들은 CVS Health가 2024년 전체 매출 전망을 낮추는 원인이 되었습니다. 단기적인 수익성 예상에도 불구하고, 2025년에는 교정 조치 덕분에 수익이 개선될 것으로 예상됩니다. 등급은 Aetna의 강력한 재무 상태, 성과, 우수한 사업 프로필, 적절한 위험 관리를 고려합니다.
AM Best a révisé les perspectives de positive à stable pour la Note de Crédit d'Émetteur à Long Terme (Long-Term ICR) de la Aetna Life Insurance Company et d'autres filiales de Aetna Inc., entièrement détenues par CVS Health (NYSE: CVS). La Note de Solidité Financière (FSR) de A (Excellente) a été confirmée. La révision reflète des tendances opérationnelles défavorables au cours du premier semestre 2024, dues à :
- L'augmentation de l'utilisation dans Medicare Advantage
- Une gravité accrue dans Medicaid en raison des réévaluations
- Des changements dans l'accumulation de l'ajustement des risques des échanges individuels
Ces facteurs ont conduit CVS Health à réduire ses prévisions de bénéfices pour l'année entière 2024. Malgré une rentabilité attendue à court terme, les bénéfices devraient s'améliorer en 2025 grâce à des mesures correctives. Les notations tiennent compte de la très solide situation financière d'Aetna, de ses solides performances, de son profil commercial favorable et de sa gestion des risques appropriée.
AM Best hat die Perspektive von positiv auf stabil für das Langfristige Emittenten-Kreditrating (Long-Term ICR) der Aetna Life Insurance Company und anderer Tochtergesellschaften der Aetna Inc., die vollständig im Besitz von CVS Health (NYSE: CVS) sind, überarbeitet. Die Finanzstärkebewertung (FSR) von A (Exzellent) wurde bestätigt. Die Überarbeitung spiegelt ungünstige Betriebstrends in der ersten Hälfte von 2024 wider, die durch Folgendes bedingt sind:
- Erhöhte Nutzung im Medicare Advantage
- Höhere Schwere in Medicaid aufgrund von Neubeurteilungen
- Änderungen bei der Risikoanpassung im Einzelhandelsgeschäft
Diese Faktoren führten dazu, dass CVS Health seine Gewinnprognose für das gesamte Jahr 2024 senken musste. Trotz der erwarteten kurzfristigen Rentabilität wird prognostiziert, dass sich die Erträge im Jahr 2025 aufgrund von Korrekturmaßnahmen verbessern werden. Die Bewertungen berücksichtigen die sehr starke Bilanz von Aetna, die starke Leistung, das günstige Geschäftsprofil und das angemessene Risikomanagement.
- Aetna Health & Life Group maintains an A (Excellent) Financial Strength Rating
- Balance sheet strength assessed as very strong
- Strong operating performance and favorable business profile
- Continued membership growth, particularly in Medicare Advantage
- Earnings and margins expected to improve in 2025 due to corrective actions
- Outlook revised to stable from positive for Long-Term Issuer Credit Rating
- Unfavorable operating trends in first half of 2024
- CVS Health lowered full-year 2024 profit outlook for second straight quarter
- Potential impact on risk-adjusted capitalization due to premium growth outpacing capital and surplus
- Elevated financial leverage at parent company CVS Health
The revision of Aetna's credit rating outlook to stable from positive signals increasing financial pressure on CVS Health's healthcare segment. This change stems from unfavorable operating trends in H1 2024, including:
- Increased utilization in Medicare Advantage
- Higher acuity in Medicaid due to redeterminations
- Changes in individual exchange business risk adjustment
These factors led to CVS Health lowering its 2024 profit outlook for the second consecutive quarter. While Aetna is expected to remain profitable, it's not at historical levels. This could impact risk-adjusted capitalization if premium growth outpaces capital and surplus. However, the group's balance sheet strength is still assessed as very strong.
Investors should monitor CVS Health's elevated financial leverage and potential reduction in dividend payments from Aetna subsidiaries, which may affect deleveraging plans or lead to additional debt issuance.
AM Best's decision to maintain Aetna's FSR at A (Excellent) while revising the Long-Term ICR outlook reflects a nuanced view of the company's position. Despite recent challenges, Aetna's core strengths remain intact:
- Very strong balance sheet
- Strong operating performance history
- Favorable business profile
- Appropriate enterprise risk management
The outlook revision primarily stems from short-term headwinds rather than fundamental issues. AM Best expects earnings and margins to improve in 2025 due to corrective actions, potentially returning to historical levels in the medium term.
For investors, this suggests that while Aetna faces near-term pressures, its long-term prospects remain solid. The company's ability to maintain its excellent FSR amid these challenges underscores its resilience and market position.
The challenges faced by Aetna, particularly in Medicare Advantage and Medicaid, reflect broader industry trends and policy shifts:
- Medicare Advantage utilization increase suggests potential mispricing or demographic shifts affecting the program.
- Medicaid redeterminations are causing higher acuity as lower-risk individuals potentially lose coverage.
- Changes in individual exchange risk adjustment point to ongoing market stabilization efforts.
These factors highlight the complex interplay between policy, demographics and healthcare economics. As the industry adapts to post-pandemic patterns and policy changes, companies like Aetna may face a period of adjustment.
Investors should consider the potential for regulatory responses or market shifts that could affect profitability across the healthcare insurance sector. The ability to navigate these changes will be important for maintaining long-term competitiveness.
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
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.
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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
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sally.rosen@ambest.com
Al Slavin
Senior Public Relations Specialist
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Source: AM Best
FAQ
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