OLDWICK, NJ–(BUSINESS WIRE)–AM Best noted that the credit ratings (ratings) of Aetna Inc.’s (Aetna) operating entities, including its rated joint ventures, remain unchanged following the announcement by their parent company, CVS Health Corporation (CVS Health) (NYSE : CVS), on September 5, 2022, that it entered into a definitive agreement to acquire Signify Health, Inc. (Signify Health), in a transaction totaling approximately $8 billion.
CVS Health will acquire the shares of Signify Health for $30.50 per share. The equity value of $7.6 billion, representing Signify Health’s net debt, equity appreciation rights and estimated fees and expenses, represents the total transaction value of approximately $8 billion. dollars. CVS Health expects to fund the transaction with existing cash from its balance sheet and available resources, and is committed to maintaining financial metrics within ranges to maintain its investment grade ratings.
The transaction has been approved by the board of directors of each of the respective companies. It is subject to additional approvals by Signify Health shareholders and the receipt of regulatory approval, as well as the satisfaction of other customary closing conditions. CVS Health and Signify Health expect the transaction to close in the first half of 2023.
From a strategic perspective, Signify Health should operate as a separate, stand-alone operation; therefore, limited integration-related disruption is expected. Strategically, this provides another opportunity for CVS Health to enter the healthcare space and expand its complementary offerings and capabilities in areas such as value-based care, its network of principal clinicians and the expansion of home health care offerings.
AM Best expects the capital of the Aetna Insurance Entities to be maintained at its overall risk-based capital target of approximately 275% of the NAIC Company’s share level. CVS Health’s financial leverage was around 43% at the end of the year, and AM Best expects the organization to continue to deleverage. AM Best will discuss with management the sources of funding for the acquisition and capitalization of the insurance entities, as well as the synergies and planned benefits that Signify Health can bring to CVS Health’s insurance operations.
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