A.M. Best Assigns Indicative Debt Ratings to Aetna's Shelf Registration.

OLDWICK, N.J. -- A.M. Best Co. has assigned indicative debt ratings of "bbb+" to senior unsecured debt, "bbb" to subordinated debt and "bbb-" to preferred stock that can be issued under Aetna Inc.'s (NYSE: AET) (Hartford, CT) recently filed shelf registration statement, which replaces the previously existing $2 billion shelf registration statement under which Aetna had issued $1.6 billion of senior unsecured debt. The rating outlook is stable. Aetna's financial strength, issuer credit and remaining debt ratings are unchanged. Proceeds from securities issued under the shelf will be used for general corporate purposes, except as specified in an applicable prospectus supplement.

Aetna has generated excellent financial returns and has excellent liquidity, with coverage at approximately 20 times in the near term. Debt-to-total capital, currently at 15%, is expected to remain at 25% or less over the medium term. In A.M. Best's opinion, Aetna's strategy for growth is well conceived and supported by its strong performance, its refurbished brand and experienced management team. Furthermore, A.M. Best believes Aetna is well positioned for continued medium-term success, all of which support the ratings.

Aetna has a high quality balance sheet and earnings stream, providing excellent debt service coverage. Excellent liquidity from operations is further supplemented by a bank line of credit, as well as cash and short-term investment at the holding company. Aetna maintains conservative financial leverage, well-capitalized regulated entities, sufficient reserves, high-quality invested assets and excellent financial flexibility. Health care earnings have continued their positive momentum, aided by positive secular industry changes.

Nonetheless, A.M. Best's current expectation is for overall medium-term industry margin contraction. As such, A.M. Best has concerns that any shortfall in Aetna attaining its membership growth goals could potentially impact the company's future margins. In addition, while expense ratios have shown improvement, Aetna's administrative infrastructure is more costly than its peers' due to high residual fixed costs after the rapid decline of its unprofitable membership.

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