A.M. Best Co. has assigned debt ratings of “bbb+” to $2 billion of senior unsecured notes recently issued in three tranches by Aetna Inc. (Aetna) (Hartford, CT) [NYSE: AET]. The ratings have been placed under review with negative implications, consistent with the under review status of the existing ratings of Aetna and its insurance subsidiaries. (See A.M. Best’s press release dated August 21, 2012 for further information.)
The proceeds from the securities will be used to finance a portion of the purchase price of the acquisition of Coventry Health Care, Inc. (Coventry). Although Aetna’s pro forma financial leverage—as well as its goodwill and intangibles to equity ratio—will be somewhat higher than similarly-rated peers, A.M. Best views favorably the low cost of capital and the laddering of maturities within Aetna’s capital structure. Additionally, the issuance is consistent with A.M. Best’s expectations with respect to Aetna’s capital structure incorporating the financing for the previously announced $7.3 billion (approximate) acquisition of Coventry.
The Coventry acquisition is expected to close mid-2013, subject to state and federal regulatory approvals and other customary closing conditions. Aetna’s ratings are anticipated to remain under review pending the completion of the transaction and A.M. Best’s continuing discussions with management. However, A.M. Best will continue to monitor Aetna’s operating performance, risk-adjusted capitalization at the operating companies and its capital structure to ensure financial and operating metrics remain within A.M. Best’s expectations.
The following debt ratings have been assigned:Aetna Inc.— -- “bbb+” on $500 million 1.50% senior unsecured notes, due 2017 -- “bbb+” on $1 billion 2.75% senior unsecured notes, due 2022 -- “bbb+” on $500 million 4.125% senior unsecured notes, due 2042 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. Founded in 1899, A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com . Copyright © 2012 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.