Aetna, the Harford, Conn.-based insurer, said it would acquire Coventry Health Care for $5.7 billion in a cash and stock deal that will expand the company's reach into Medicaid and Medicare. The announcement prompted the company Fitch Ratings to put Aetna's ratings on watch.
The deal is the latest big play by a national insurer to get a bigger footprint in Medicaid and Medicare as the programs are poised to grow significantly under the Patient Protection and Affordable Care Act and the demands of an aging population.
“The acquisition of Coventry, when combined with our existing Medicare capabilities, gives us a leading franchise across each of the major products of Medicare,” Mark Bertolini, Aetna's chairman, CEO and president, said during a conference call. “This broad Medicare portfolio positions us to capture our fair share of the growing Medicare marketplace as baby boomers enter the program in greater numbers over the years to come.”
Fitch Ratings announced today that it had placed Aetna's ratings on watch, noting its concern over the insurer's “post-close financial leverage and the integration risks associated” with the Coventry deal. While Fitch said that the acquisition is “strategically beneficial” to Aetna, it said the company's previous acquisitions were less complex and materially smaller.