) completed the acquisition of Coventry Health Care Inc., which
was announced in August last year. As a result, Aetna raised its
operating earnings guidance for 2013 to $5.70-$5.85 per share
from $5.50-$5.60 per share estimated earlier.
Impact of the Acquisition
Aetna believes that the acquisition will enhance its financial
and strategic expertise to meet the evolving needs of customers.
The takeover has expanded the government programs business of the
As a result, Aetna's medical membership has increased by 3.7
million and its Medicare Part D enrollment has surged by 1.5
million. Additionally, its Medicaid membership crossed the 2
million mark, rising from 1.1 million earlier.
Moreover, Aetna's Medicaid business now has presence in 16
states, compared with 12 states earlier. The company has been
focusing on expanding its government programs, apart from
vertical and horizontal expansion of its insurance business, as
the government programs business is currently undergoing rapid
As a result of the closure of the deal, Fitch Ratings has
affirmed the issuer default rating of Aetna at "A" and the
insurer financial strength rating of its operating subsidiaries
at "AA-". Additionally, the rating agency removed these ratings
from "Rating Watch Negative". However, these ratings still carry
a negative outlook.
On Aug 20, 2012, Aetna signed an agreement to acquire Coventry
Health for $7.3 billion. The purchase consideration also includes
the takeover of the latter's debt.
As per the agreement, shareholders of Coventry Health will get
a cash consideration of $27.30, along with 0.3885 Aetna shares,
for each Coventry Health share. This translates into a total
purchase consideration of $42.08 per share, based on the closing
price of Aetna's shares on Aug 17, 2012.
Aetna financed the cash component of the purchase
consideration using a variety of sources, including cash in hand
at the companies as well as new debt and commercial paper issued
Aetna currently carries a Zacks Rank #2 (Buy). Other health
maintenance organizations worth considering are
Molina Healthcare Inc.
Health Net Inc.
). Both these companies carry a Zacks Rank #2 (Buy).
AETNA INC-NEW (AET): Free Stock Analysis
HEALTH NET INC (HNT): Free Stock Analysis
HUMANA INC NEW (HUM): Free Stock Analysis
MOLINA HLTHCR (MOH): Free Stock Analysis
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