CVS Subsidiaries' Credit Ratings Affirmed with Positive Outlook on Financial Expansion

AM Best, a leading global credit rating agency, has confirmed its top-tier financial strength and credit evaluations for major CVS subsidiaries operating within the Aetna Health & Life Group. The affirmation reflects strong capitalization metrics and solid operational performance across the portfolio of CVS subsidiaries under the Aetna umbrella.

Strong Financial Foundation Supports Stable Ratings

The Financial Strength Rating (FSR) of A (Excellent) and Long-Term Issuer Credit Ratings (Long-Term ICR) of “a” (Excellent) have been confirmed for Aetna Life Insurance Company and affiliated members of the Aetna Health & Life Group, wholly owned subsidiaries of CVS Health Corporation. The FSR carries a stable outlook, while the Long-Term ICR outlook has been upgraded to positive—a significant indicator of improving financial trajectory.

Similar ratings affirmations extend to Texas Health + Aetna Health Insurance Company and Texas Health + Aetna Health Plan Inc., both based in Arlington, TX. Additionally, Allina Health and Aetna Insurance Company (St. Louis Park, MN) maintains the same credit profile, with stable outlooks across all joint venture entities.

Capital Strength Drives Positive Momentum

The positive Long-Term ICR outlook for the Aetna Health & Life Group is primarily driven by strengthening risk-adjusted capitalization, which remains at the strongest level as measured by the Best Capital Adequacy Ratio (BCAR). Capital growth has outpaced premium expansion over several years, supported by strong earnings and measured dividend distributions to the parent company.

A notable trend in recent years has been the continued reduction in high-risk investment categories, particularly commercial mortgage loans and BA-rated assets. This de-risking strategy has contributed meaningfully to improved risk-adjusted capitalization levels. The group maintains good overall liquidity supported by access to the Federal Home Loan Bank of Boston, with no outstanding debt on its balance sheet.

Operating Performance Reflects Market Expansion

Premium growth over the past three years has been driven substantially by expansion in the government health care segment. Medicare Advantage and Medicaid products comprise approximately 75% of total membership as of year-end 2022. Medicaid enrollment growth accelerated through 2022 due to suspended eligibility redeterminations, though enrollment growth is expected to normalize during 2023-2024.

The company has partially offset anticipated Medicaid contraction through expansion into individual public health exchanges in 2022. Despite COVID-19-related volatility in claims experience, the Aetna Health & Life Group demonstrated resilience with underwriting and net income of approximately $2 billion annually over the past five years. Return on equity exceeded 20% on a one-year basis, while operating return on revenue maintained a range of 5-7%.

Competitive Position and Strategic Advantages

Aetna maintains a leading competitive position across U.S. managed care markets while preserving strength in non-government segments. The relationship with CVS Health provides competitive differentiation through integrated primary care services via MinuteClinic, positioned as a cost-efficient care delivery channel.

Parent Company Leverage and Acquisition Impact

Credit ratings reflect expectations regarding CVS Health’s elevated financial leverage resulting from recently announced acquisitions. Financial leverage improved to 41% at year-end 2022 as part of ongoing deleveraging efforts; however, leverage is anticipated to increase during 2023 as CVS Health finances portions of planned acquisitions including Signify Health and Oak Street Health, both expected to close during the year. Goodwill to shareholder equity exceeded 100% at year-end 2022, with potential further increases following acquisition closures.

Joint Venture Performance Gains Momentum

Texas Health Aetna joint venture operations achieved profitability in 2022 for the first time, generating approximately $10 million in net income supported by underwriting gains and lower amortization expenses. Similarly, Allina Health and Aetna Insurance Company reported positive underwriting results in 2022, the first since inception, primarily driven by Medicare segment growth, though overall net results remain negative due to intangibles amortization.

The comprehensive ratings affirm strong foundational strength and appropriate enterprise risk management across the CVS subsidiaries, supporting continued stability in the broader insurance portfolio.