The top insurance regulator in New York state has told her counterpart in Connecticut that letting CVS Corp. acquire Aetna Inc. could hurt Aetna policyholders.
Maria Vullo, the superintendent of the New York State Department of Financial Services, made that point in a letter she sent last week to Katharine Wade, the Connecticut insurance commissioner.
CVS has taken on a considerable amount of debt to acquire Aetna, Vullo writes.
“The considerable pressure to repay debt would cause the resulting company to repay its substantial obligation before investing in other pro-market and pro-consumer measures,” Vullo writes.
The pressure could also lead to premium increases for Aetna policyholders, Vullo writes.
Vullo cites predictions from S&P that completing the deal would weaken CVS’s financial profile as evidence for the idea that the deal could hurt Aetna’s operations.
What Is CVS Trying to Do?
CVS — a Woonsocket, Rhode Island-based drugstore company and pharmacy benefit manager (PBM) — is trying to acquire Aetna, which is based in Hartford, through a deal with an estimated value of $68 billion. CVS borrowed $40 billion to finance the deal in March, by issuing investment-grade bonds.
CVS has told Connecticut regulators that it should be able to cut its ratio of net debt to EBITDA to about 3 times EBITDA in 2021, from 4.5 times EBITDA today, if it keeps Aetna’s existing financial policies in place.
What Is EBITDA?
“EBITDA” is an acronym that stands for “earnings before interest, tax, depreciation and amortization.”