Fitch Ratings announced Friday in a news release that it would lower Aetna’s financial ratings by a full step once the insurer acquires Humana later this year, reported journalinquirer.com
From “A-,“ Aetna’s rating (considered “high credit quality”) would move to BBB, which means “good credit quality.”
On Fitch’s website, the lower rating is further defined. The BBB rating means that a company’s “capacity for payment of financial commitments is considered adequate.” The same rating, however, suggests that “adverse business or economic conditions are more likely to impair this capacity.”
In April, Aetna posted a 6.5% decline in net earnings for the first quarter of the year.
“Assuming the acquisition and its financing are completed as currently envisioned, upon close of the acquisition, Fitch expects to downgrade Aetna’s ratings,” Fitch’s analysts said in the news release.
Aetna’s anticipated ratings downgrade puts the insurer in Fitch’s “Rating Watch Negative” status. It reflects, as the ratings agency puts it, “significant deterioration” in the company’s financial standing after it closes the Humana deal. It also suggests the “potential operational and/or earnings disruptions that could arise as these two very large and complex organizations are integrated.”
Fitch also said that it does not expect Aetna’s rating to “return to a level considered appropriate for its current rating category” within one or two years after the Humana acquisition.
In April, CEO Mark T. Bertolini stated that following the merger, Aetna’s Medicare and Medicaid insurance operations would be moved to Humana’s headquarters in Louisville, Kentucky. Bertolini has not said what would happen to Aetna’s 6,500 employees in Connecticut.