OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has assigned a Long-Term Issue Credit Rating of “bbb” to the forthcoming $1 billion 3.875% senior unsecured notes due August 2047, which will be issued on Aug. 10, 2017, by Aetna Inc. (Aetna) (headquartered in Hartford, CT) [NYSE:AET]. The outlook assigned to this Credit Rating (rating) is stable.
A.M. Best anticipates that Aetna will use the proceeds from this offering to pay down debt maturities in November and December of 2017 and for general corporate purposes. The existing ratings of Aetna and its subsidiaries are unchanged.
Aetna’s financial leverage improved substantially following the mandatory early redemption of $10.2 billion of senior notes in February 2017. The notes were issued in 2016 to finance the anticipated acquisition of Humana, Inc (Humana). Following the termination of the transaction due to the blocking of the merger by U.S. Department of Justice, Aetna redeemed a significant portion of the debt issued in 2016, resulting in financial leverage declining to under 40% as of June 30, 2017, compared with over 50% at year-end 2016. As a result of the new debt issuance, A.M. Best expects Aetna’s debt-to-capital ratio to uptick slightly until the upcoming maturities are paid later in 2017; however, the ratio is expected remain below 40%. Aetna’s shareholders’ equity declined at June 30, 2017, compared with year-end 2016, as the company accelerated share repurchase and paid a higher dividend. While remaining positive, Aetna’s financial results were negatively affected by the payment of the $1 billion merger termination fee to Humana in early 2017. However, Aetna’s group commercial and government business posted stronger-than-anticipated results supported by premium growth and modest cost trend.
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