Fitch downgrades Aetna

Fitch Ratings said it downgraded the insurer financial strength ratings of Aetna Inc. to A from AA-, along with its issuer default rating to BBB+ from A and the ratings on its existing senior unsecured debt to BBB from A-.

The outlook is stable.

The downgrades follow news that CVS Health Corp. has completed its acquisition of Aetna for cash and stock consideration of about $70 billion, Fitch said.

The primary driver of the rating actions is the very high financial leverage of the combined company, the agency explained, as well as the potential for significant business disruption and unforeseen costs at a time when the company will be operating at such elevated financial leverage.

The ratings were originally placed on Rating Watch negative in December 2017 following news that the two companies signed a definitive merger agreement.

Fitch said it believes the combination of CVS and Aetna offers the potential for significant strategic benefits, including lower cost of care, administrative efficiencies and improved care coordination for Aetna's members.

The agency said it believes that concerns around the combined company's considerable increase in financial leverage to fund the acquisition outweigh the potential benefits.

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