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.