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) 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.

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