Aetna Completes Acquisition of Coventry Health Care, Inc.

Aetna Completes Acquisition of Coventry Health Care, Inc.

- Updates full-year operating earnings-per-share projection to a range of $5.70 to $5.85(1)-

HARTFORD, Conn.--(BUSINESS WIRE)-- Aetna (NYSE: AET) announced it has completed its acquisition of Coventry Health Care, Inc., a diversified managed health care company based in Bethesda, Md.

Aetna now projects full-year 2013 operating earnings per share of $5.70 to $5.85,(1) an increase of $0.20 to $0.25 per share due to the completion of the Coventry acquisition. Aetna's previous projection was $5.50 to $5.60 of operating earnings per share.(1) Aetna will host a brief conference call today at 5 p.m. ET to provide details on its combined company projections for 2013. At that time, an updated summary of Aetna's full-year projections will be made available on the Investor Information section of

"The successful completion of our acquisition of Coventry presents new opportunities for Aetna and supports our strategy for growth in the changing health care marketplace," said Mark T. Bertolini, Aetna's chairman, CEO and president. "Together, we are well positioned - competitively, strategically and financially - to meet the evolving needs of the people we serve."

The acquisition builds on Aetna's existing resources and capabilities, and increases the company's mix of business in higher-growth Government programs. As a result of the acquisition, Aetna has added approximately 3.7 million medical members and 1.5 million Medicare Part D members. In addition, Aetna's Medicaid business has grown from 1.1 million members to more than 2 million members, and its Medicaid footprint has expanded from 12 to 16 states.

Bertolini continued, "An integral part of Aetna's growth strategy is to enhance the depth and breadth of our core insurance business while increasing our presence in the fast-growing government sector, all toward expanding our relationships with local providers. Coventry helps us realize these goals."

The public may access the conference call through a live audio webcast available via Aetna's Investor Information link on the Internet at Financial and other information, including any GAAP reconciliations, related to the conference call also will be available on Aetna's Investor Information website.

The conference call also can be accessed by dialing 1-888-471-3842 or +1-719-457-2658 for international callers. The company suggests participants dial in approximately 10 minutes before the call. The access code is 3782507. Individuals who dial in will be asked to identify themselves and their affiliations.

A replay of the call may be accessed through Aetna's Investor Information link on the Internet at or by dialing 1-888-203-1112, or +1-719-457-0820 for international callers. The replay access code is 3782507. Telephone replays will be available until noon ET on May 22, 2013.

Anyone listening to Aetna's call and/or webcast is encouraged to read Aetna's 2012 Annual Report on Form 10-K and Quarterly Report on Form 10-Q for the first quarter of 2013 and Coventry's Quarterly Report on Form 10-Q for the first quarter of 2013, each on file with the Securities and Exchange Commission, including the discussion of risk factors contained therein and the discussion of Aetna's historical results of operations and financial condition contained in Aetna's filings.

About Aetna

Aetna is one of the nation's leading diversified health care benefits companies, serving an estimated 44 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

(1) Projected operating earnings per share exclude from net income net realized capital gains of $19.3 million ($30.3 million pretax) and transaction and integration-related costs of $24.6 million ($37.1 million pretax), reported by Aetna for the three months ended March 31, 2013. Projected operating earnings per share also exclude from net income any future 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. Projected operating earnings per share for the full year 2013 assume approximately 362 - 363 million weighted average diluted shares. 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 going forward now that 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 operating earnings per share; weighted average diluted shares; and the impact of the Coventry acquisition on our operating earnings per share, businesses and results. 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 implementation of health care reform legislation; the outcome of pending or future litigation relating to the Coventry transaction; our ability to achieve the synergies and value creation contemplated by the Coventry acquisition; our ability to promptly and effectively integrate Coventry's business; the diversion of management time on acquisition- and/or integration-related issues; 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); our ability to diversify our sources of revenue and earnings (including by expanding our foreign operations), transform our business model and optimize our business platforms; the success of our HealthagenSM, Accountable Care Solutions and health information technology initiatives; 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 and/or life insurance policies; 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 integrate our businesses (including Coventry, Medicity, Prodigy Health Group, PayFlex, and Genworth Financial Inc.'s Medicare Supplement business and other businesses we may acquire in the future) and 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 demonstrate that our products lead to access to quality care by our members; our ability to maintain our relationships with third party brokers, consultants and agents who sell our products; increases in medical costs or Group Insurance claims resulting from any epidemics, acts of terrorism or other extreme events; 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; and the ability to successfully implement our agreement with CVS Caremark Corporation on a timely basis and in a cost-efficient manner and to achieve projected operating efficiencies for the agreement. 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") and Coventry's Quarterly Report on Form 10-Q for the quarter ended March 31, 2013, each on file with the Securities and Exchange Commission. 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.

Media Contact:
Cynthia Michener, 860-273-8553
Investor Contact:
Tom Cowhey, 860-273-2402

KEYWORDS: United States North America Connecticut Maryland


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