S&P: Aetna on developing watch, Humana on watch

S&P said it placed the ratings on Aetna Inc. on CreditWatch with developing implications.

The agency also said it placed Humana Inc. and its core subsidiaries on CreditWatch with negative implications.

The ratings on Humana Health Plans of Puerto Rico Inc., Humana Insurance of Puerto Rico Inc. and Kanawha Insurance Co. are unaffected.

The CreditWatch placements follow the filing by the U.S. Dept. of Justice of a lawsuit opposing Aetna's planned $37 billion acquisition of Humana, S&P said.

Aetna has communicated its intent to vigorously defend its pending transaction, the agency added.

S&P said it believes that deal termination, despite the incurrence of a $1 billion deal break-up fee, would likely have a positive impact on Aetna's financial risk profile given the requirement for significant repayment of debt issued to fund the deal.

But, the agency also said it believes that Aetna's intent to litigate could meaningfully extend the timeline to resolution.

As a result, financial leverage and associated debt service could be meaningfully worse through the 2017 period, S&P said.

A deal termination also would negatively affect Humana's credit profile because of the removal of benefit associated with being a core component of a larger, more well-diversified enterprise, the agency added.

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