AM Best Affirms Aetna and CVS Health Insurance Ratings as Stable
AM Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) and Long-Term Issuer Credit Ratings (Long-Term ICRs) of “a” (Excellent) for Aetna Life Insurance Company and other members of the Aetna Health & Life Group, which are subsidiaries of CVS Health. The ratings reflect Aetna's very strong balance sheet, strong operating performance, favorable business profile, and enterprise risk management practices. The group has shown steady capital and surplus growth bolstered by capital contributions from CVS Health, with a primarily investment-grade fixed-income portfolio and adequate liquidity, including access to the Federal Home Loan Bank of Boston.
Aetna Health & Life Group’s underwriting performance faced challenges in 2024 due to increased utilization, Medicare Advantage star rating declines, and higher Medicaid acuity, but these ratings benefit from anticipated improvements in 2025 through improved star ratings, pricing actions, and initiatives to restore profitability. The group sees growth in commercial and Medicare Advantage membership but expects a decline in Medicare Advantage and individual exchange membership in 2025. Investment income remains steady, supporting overall earnings.
The ratings of Allina Health and Aetna Insurance Company, a joint venture, were also affirmed, reflecting adequate balance sheet strength and support from Aetna despite a recent underwriting loss linked to utilization in Medicare Advantage. Commercial premium declined slightly while Medicare Advantage premiums grew. CVS Caremark Indemnity, a Bermuda-based entity, also maintained its rating with adequate operating performance and strong balance sheet support from CVS Health.
The ratings consider the elevated financial leverage and goodwill on CVS Health’s balance sheet due to acquisitions and capital contributions to subsidiaries, with an expected improvement in leverage trends as earnings recover. Goodwill exceeded 120% of shareholder equity following acquisitions of Oak Street Health and Signify Health.
Overall, AM Best’s affirmations reflect Aetna Health & Life Group’s robust capital adequacy, risk management, and improving operating conditions amid some underwriting and market challenges, emphasizing the importance of capital support from CVS Health and strategic business positioning across commercial, Medicare, and Medicaid products.