Aetna to Complete Acquisition of Coventry Health Care

  Aetna to Complete Acquisition of Coventry Health Care

-- Closing of Coventry acquisition expected within the next 3 business days --

Business Wire

HARTFORD, Conn. -- May 3, 2013

Aetna (NYSE: AET) today announced the U.S. Department of Justice (DOJ) has
cleared Aetna’s proposed acquisition of Coventry Health Care, Inc. Aetna
expects to complete its acquisition of Coventry within the next three business
days.

Aetna’s projections for the Coventry transaction remain unchanged. Aetna
continues to project that the transaction will be modestly accretive to 2013
operating earnings per share, with $0.45 of accretion in 2014 and $0.90 of
accretion in 2015.^(1) Shortly following the completion of the Coventry
transaction, Aetna will provide combined company projections for 2013,
including specific operating earnings-per-share accretion and synergy
projections for 2013.

About Aetna

Aetna is one of the nation's leading diversified health care benefits
companies, serving approximately 38.3 million people with information and
resources to help them make better informed decisions about their health care.
Aetna offers a broad range of traditional, voluntary and consumer-directed
health insurance products and related services, including medical, pharmacy,
dental, behavioral health, group life and disability plans, and medical
management capabilities, Medicaid health care management services, workers'
compensation administrative services and health information technology
services. Aetna’s customers include employer groups, individuals, college
students, part-time and hourly workers, health plans, health care providers,
governmental units, government-sponsored plans, labor groups and expatriates.
For more information, see www.aetna.com.

(1) Projected operating earnings per share exclude from net income any net
realized capital gains and losses and other items, if any, that neither relate
to the ordinary course of our business nor reflect our underlying business
performance. Projected operating earnings per share also exclude projected
transaction and integration-related costs related to the Coventry acquisition.
Aetna is not able to project the amount of future net realized capital gains
and losses or any such other items (other than projected transaction and
integration-related costs related to the Coventry acquisition) and therefore
cannot reconcile projected operating earnings per share to projected net
income per share in any period. Transaction costs include advisory, legal and
other professional fees which are not deductible for tax purposes and are
reflected in our GAAP Consolidated Statements of Income in general and
administrative expenses. Transaction costs also include transaction-related
payments and pre-closing expenses related to the negative cost of carry
associated with the permanent financing that we obtained in November 2012 for
the Coventry acquisition. The components of negative cost of carry associated
with the permanent financing will be included in operating earnings per share
after the closing of the Coventry acquisition is complete and are reflected in
our GAAP Consolidated Statements of Income in interest expense, net investment
income, and general and administrative expenses. Although the excluded items
may recur, management believes that operating earnings per share provides a
more useful comparison of Aetna’s underlying business performance from period
to period. Net realized capital gains and losses arise from various types of
transactions, primarily in the course of managing a portfolio of assets that
support the payment of liabilities. However, these transactions do not
directly relate to the underwriting or servicing of products for customers and
are not directly related to the core performance of Aetna’s business
operations. In addition, management uses operating earnings per share to
assess business performance and to make decisions regarding Aetna’s operations
and allocation of resources among Aetna’s businesses. Operating earnings per
share is also the measure reported to the Chief Executive Officer for these
purposes.

CAUTIONARY STATEMENT; ADDITIONAL INFORMATION -- -- Certain information in this
press release is forward-looking, including our projections as to the timing
of the closing of the Coventry acquisition and the impact of the Coventry
acquisition on our 2013, 2014 and 2015 operating earnings per share.
Forward-looking information is based on management's estimates, assumptions
and projections and is subject to significant uncertainties and other factors,
many of which are beyond our control. Important risk factors could cause
actual future results and other future events to differ materially from those
currently estimated by management, including, but not limited to: the timing
to consummate the proposed acquisition of Coventry; the risk that a condition
to closing of the proposed acquisition may not be satisfied; the outcome of
pending or future litigation relating to the proposed transaction; our ability
to achieve the synergies and value creation contemplated by the proposed
acquisition; our ability to promptly and effectively integrate Coventry's
business; the diversion of management time on acquisition-related issues; the
implementation of health care reform legislation; and changes in our future
cash requirements, capital requirements, results of operations, financial
condition and/or cash flows. Health care reform will significantly impact our
business operations and financial results, including our pricing and medical
benefit ratios. Components of the legislation will be phased in over the next
several years, and we will be required to dedicate material resources and
incur material expenses during that time to implement health care reform. Many
significant parts of the legislation, including health insurance exchanges,
Medicaid expansion, employer penalties and the implementation of minimum
medical loss ratios, require further guidance and clarification at both the
federal level and/or in the form of regulations and actions by state
legislatures to implement the law. In addition, pending efforts in the U.S.
Congress to amend or restrict funding for various aspects of health care
reform, and the possibility of additional litigation challenging aspects of
the law continue to create additional uncertainty about the ultimate impact of
health care reform. As a result, many of the impacts of health care reform
will not be known for the next several years. Other important risk factors
include: adverse changes in health care reform and/or other federal or state
government policies or regulations as a result of health care reform or
otherwise (including legislative, judicial or regulatory measures that would
affect our business model, restrict funding for or amend various aspects of
health care reform, limit our ability to price for the risk we assume and/or
reflect reasonable costs or profits in our pricing, such as mandated minimum
medical benefit ratios, eliminate or reduce ERISA pre-emption of state laws
(increasing our potential litigation exposure) or mandate coverage of certain
health benefits); adverse and less predictable economic conditions in the U.S.
and abroad (including unanticipated levels of, or increases in the rate of,
unemployment); adverse changes in size, product or geographic mix or medical
cost experience of membership; managing executive succession and key talent
retention, recruitment and development; failure to achieve and/or delays in
achieving desired rate increases and/or profitable membership growth due to
regulatory review or other regulatory restrictions, the difficult economy
and/or significant competition, especially in key geographic areas where
membership is concentrated, including successful protests of business awarded
to us; failure to adequately implement Health Care Reform; reputational issues
arising from our social media activities, data security breaches, other
cybersecurity risks or other causes; the outcome of various litigation and
regulatory matters, including audits, challenges to our minimum MLR rebate
methodology and/or reports, guaranty fund assessments, intellectual property
litigation and litigation concerning, and ongoing reviews by various
regulatory authorities of, certain of our payment practices with respect to
out-of-network providers; our ability to integrate, simplify, and enhance our
existing information technology systems and platforms to keep pace with
changing customer and regulatory needs; our ability to successfully implement
multiple strategic and operational initiatives simultaneously; unanticipated
increases in medical costs (including increased intensity or medical
utilization as a result of flu, increased COBRA participation rates or
otherwise; changes in membership mix to higher cost or lower-premium products
or membership-adverse selection; increases resulting from unfavorable changes
in contracting or re-contracting with providers, and increased pharmacy
costs); our ability to manage health care and other benefit costs; adverse
program, pricing, funding or audit actions by federal or state government
payors, including as a result of sequestration and/or curtailment or
elimination of the Centers for Medicare & Medicaid Services' star rating bonus
payments; our ability to reduce administrative expenses while maintaining
targeted levels of service and operating performance; a downgrade in our
financial ratings; our ability to develop and maintain relations with
providers while taking actions to reduce medical costs and/or expand the
services we offer; our ability to maintain our relationships with third party
brokers, consultants and agents who sell our products; increases in medical
costs resulting from any epidemics, acts of terrorism or other extreme events;
and changes in medical cost estimates due to the necessary extensive judgment
that is used in the medical cost estimation process, the considerable
variability inherent in such estimates, and the sensitivity of such estimates
to changes in medical claims payment patterns and changes in medical cost
trends. For more discussion of important risk factors that may materially
affect Aetna, please see the risk factors contained in Aetna's 2012 Annual
Report on Form 10-K ("Aetna's Annual Report") and Aetna’s Quarterly Report on
Form 10-Q for the quarter ended March 31, 2013 (“Aetna’s Quarterly Report”),
each on file with the SEC. You also should read Aetna's Annual Report and
Aetna’s Quarterly Report for a discussion of Aetna's historical results of
operations and financial condition.

Contact:

Aetna
Media Contact:
Cynthia Michener, 860-273-8553
michenerc@aetna.com
or
Investor Contact:
Tom Cowhey, 860-273-2402
cowheyt@aetna.com
 
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