OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has assigned a Financial Strength Rating of A (Excellent) and a Long-Term Issuer Credit Rating of “a” to Allina Health and Aetna Insurance Company (Allina Health Aetna) (Minneapolis, MN). The Credit Ratings (ratings) were placed under review with negative implications similar to the ratings of all Aetna Inc.’s (Aetna) subsidiaries and joint ventures rated by A.M. Best due to the pending acquisition of Aetna by CVS Health Corporation.
The ratings reflect Allina Health Aetna’s balance sheet strength, which A.M. Best categorizes as very strong, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management. The ratings also include support of the parent organizations, Aetna and Allina Health System (Allina).
Allina Health Aetna is the result of a 50/50 joint venture between Aetna ACO Holdings Inc., an affiliate of Aetna, and Allina, a leading health system in the Minneapolis area. Allina Health Aetna intends to focus on cost-efficient care delivery, customer convenience, and an increased level of collaboration between payer and provider. Allina Health Aetna is expected to build on the strength of Allina’s wide presence of hospitals and physicians in the service area and Aetna’s operational capabilities. Allina Health Aetna is expected to incur operating losses in the near term due to the start-up nature of operations; however the company is expected to exhibit steady profitable growth over the next several years. The level of risk-adjusted capitalization is currently more than sufficient to support the anticipated level of business and investment risks. In addition, Aetna and Allina have ample liquidity and capital resources to support the new entity, if needed.
Offsetting rating factors include the start-up nature of operations and the highly competitive marketplace in the service area. In addition, Aetna currently does not have a presence in the Minneapolis area.
Allina Health Aetna is susceptible to typical, potential operational and business risks of a start-up company. The competitive advantage of Allina Health Aetna is tied to the ability of Aetna and Allina to integrate their resources and build effective operations, with a focus on the customer. Failure to execute may diminish the value proposition and make it difficult to achieve growth goals. The marketplace in the Minneapolis area is becoming even more competitive, following the lift of a long-term ban on for-profit carriers to operate in the state. Such market conditions create the potential for irrational pricing and pressure on carriers.
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