Aetna’s Acquisition Boosts Leverage

Insurer’s $5.7 bln purchase of Coventry will push debt to 40% of capital.

Aetna Inc.’s $5.7 billion purchase of Coventry Health Care Inc. will take the insurer from about the bottom to the top of leverage among its peers as it seeks to cut $400 million of costs.

Aetna’s push to compete with WellPoint Inc. and Cigna Corp. as the U.S. government increases medical coverage will bring its debt to about 40 percent of capital from about 31 percent, according to Fitch Ratings. That would be the highest among the six firms in the Standard & Poor’s 500 Managed Health Care Sub Industry index.

Coventry Cash

Coventry has about $850 million in cash, according to Citigroup Inc. The combined company may have earnings before interest, taxes, depreciation and amortization of $3.3 billion in 2014, compared with $2.1 billion for Aetna on its own, according to Citigroup.

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