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FOR IMMEDIATE RELEASE
OLDWICK, N.J. - JANUARY 13, 2004 12:00 AM (EST)
A.M. Best Co. has assigned debt ratings to Aetna Inc.'s (Hartford, CT) [NYSE: AET] outstanding senior notes and shelf registration. Additionally, A.M. Best has upgraded the financial strength ratings of several Aetna subsidiaries-including Aetna Life Insurance Company-assigned initial financial strength ratings to three subsidiaries and assigned a positive outlook to three HMOs. The outlook is stable for Aetna's other rated HMOs and an insurance company. (Please see attached listing.)
Aetna has substantially completed a successful financial and strategic turnaround, generating excellent financial returns, while continuing to improve its financial fundamentals. In A.M. Best's opinion, Aetna's new strategy for growth is well conceived and supported by its initially strong performance, its refurbished brand and experienced management team. Furthermore, A.M. Best believes Aetna is well positioned for continued medium-term success, all of which are driving the financial strength rating upgrades.
Aetna has a high quality balance sheet and earnings stream, providing excellent debt service coverage. Aetna maintains conservative financial leverage, a strong holding company cash position, well-capitalized regulated entities, sufficient reserves, high-quality invested assets and excellent financial flexibility. Health care earnings have continued their positive momentum, aided by the timing of the turnaround effort and positive secular industry changes, complementing Aetna's historically profitable group insurance and discontinued large-case pension product segments.
Nonetheless, A.M. Best is concerned that any shortfall in Aetna attaining its membership growth goals could tighten future margins beyond A.M. Best's expectation of overall medium-term industry margin contraction. Aetna's administrative infrastructure is more costly than its peers' due to high residual fixed costs after the rapid decline of its unprofitable membership. Also, Aetna's return to membership growth has taken longer than expected, owing partially to a soft labor market.
For a complete list of Aetna Inc.'s debt and financial strength ratings, please visit Aetna.
For a list of A.M. Best's debt ratings, please visit debt.
A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source.