A.M. Best Assigns Rating to Aetna Inc.’s New Senior Unsecured Notes

A.M. Best Co. has assigned a debt rating of “bbb+” to the $750 million 3.95% senior unsecured notes, due 2020 recently issued by Aetna Inc. (Aetna) (headquartered in Hartford, CT) [NYSE: AET]. The rating outlook is stable.

A.M. Best expects the proceeds from this offering to be used by Aetna for general corporate purposes, which may include the repayment of short- and long-term debt. The existing ratings of Aetna and its subsidiaries are unchanged.

This offering is expected to have a minimal impact on Aetna’s financial leverage. Aetna’s debt-to-capital ratio was 28.3% at June 30, 2010, which was down from year-end 2009, mainly due to higher than expected earnings from operations. A.M. Best expects Aetna will manage its financial leverage to a target of 30% or below for year-end 2010. Aetna has reported good operating earnings through the second quarter of 2010, driven by improved premium yields and favorable prior period development. Earnings Before Interest and Taxes coverage was almost nine times at year-end 2009 and is expected to remain at approximately the same level for full-year 2010.

Aetna’s financial flexibility is supported by its commercial paper program, parent company cash, subsidiary dividends and its untapped $1.5 billion credit facility. Aetna’s continued favorable net income has contributed to solid capital levels at its insurance subsidiaries through retained earnings. Additionally, subsidiary dividend capacity and capitalization are projected to remain good.

The principal methodology used in determining these ratings is Best’s Credit Rating Methodology -- Global Life and Non-Life Insurance Edition, which provides a comprehensive explanation of A.M. Best’s rating process and highlights the different rating criteria employed. Additional key criteria utilized include “A.M. Best’s Ratings & the Treatment of Debt.” Methodologies can be found at www.ambest.com/ratings/methodology

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.