Aetna prices $200m Vitality Re XIII at mid & top-ends of guidance

Aetna prices $200m Vitality Re XIII at mid & top-ends of guidance

Aetna, the health, medical and benefits insurance unit of CVS Health, has now priced its thirteenth Vitality Re health insurance coverage catastrophe bond structure and is on track to secure the targeted $200m of reinsurance from its Vitality Re XIII Ltd (Series 2022) transaction, with rates at the mid and top-ends of guidance.Its the second year in succession that Aetnas annual Vitality Re health insurance-linked securities (ILS) issuance has priced higher up.
The Vitality Re ILS deals have more typically priced down while market, squeezing the economics on what is an actually capital efficient deal for the sponsor.
However, because the introduction of the COVID-19 pandemic and along with other classes of catastrophe bond and ILS service, weve now seen two years where rates has not tumbled and has in reality increased, or settled on-target.
ILS fund supervisors and financiers will be pleased this is the case, as there is a flooring on their cravings even for the most remote dangers, beyond which they do not desire to keep cutting back margin from their returns.
Aetna went back to the ILS market earlier this month with its latest Vitality Re deal, which is the thirteenth.
You can see all thirteen of Aetnas Vitality Re health ILS transactions in our Deal Directory.
The insurance provider signed up a brand-new Cayman Islands company as the company of its newest disaster bond, Vitality Re XIII Limited.
Vigor Re XIII Limited was targeting the issuance of 2 tranches of Series 2022 insurance-linked notes notes, intending to secure $200 million in risk capital, through the sale of the notes to financiers. The resulting collateral will now be used to collateralise underlying reinsurance agreements for Aetna.
As in every Vitality Re ILS transaction, Aetna Life Insurance Company will participate in a quota share health reinsurance arrangement with Vermont hostage Health Re Inc., and Health Re will in turn participate in an excess of loss reinsurance arrangement for each tranche of notes issued by Vitality Re XIII Ltd
. The reinsurance coverage Aetna gets from these offers is on a yearly aggregate indemnity plan, however with the trigger based on an index linked to Aetnas medical advantage claims ratio. Must the claims index rises above a predefined attachment point, for either of the tranches of notes provided by Vitality Re XIII, it can activate a healing payment.
The Vitality Re XIII health ILS offer will supply Aetna with four years of reinsurance defense and each tranche of notes covers a different layer of its reinsurance needs.
Neither tranche has been upsized, which is common of Aetnas health insurance linked disaster bond design deals, with the $200 million target now set to be attained as both tranches of notes have been priced.
A $140 million Vitality Re XIII Class A tranche of notes will offer reinsurance to Aetna versus losses above a medical advantage claims ratio of 105%, comparable to a $1.05 billion loss level, which gives them an anticipated loss of around 0.01%. They will cover losses approximately a medical advantage claims ratio of 119%, or $1.19 billion of losses.
The Class A tranche of notes were marketed to ILS financiers with voucher rate assistance in a range from 1.75% to 2.25%. Were now told that prices settled at the mid-point of 2%.
A $60 million tranche of Vitality Re XIII Class B notes will use Aetna with reinsurance defense against losses above a medical advantage claims ratio of 99%, equivalent to a $990 million loss level, providing an anticipated loss of around 0.18%. These notes are the riskier layer, covering losses to a claims ratio of 105%, or $1.05 billion, so the Class B notes remove where the Class A notes would attach and start paying claims.
The Class B notes were offered to ILS investors with price assistance in a range from 2.25% to 2.75%. Were now informed that rates for the Class B tranche has actually moved greater and will settle at the upper-end of guidance, at 2.75%.
The prices is close to where in 2015s offer settled and lined up with a small uptick from historical several levels for the Aetna health ILS series of deals.
As we explained formerly, Aetnas medical advantage ratio (MBR) has actually been raised in recent quarters and the MBR is stated to have neared 100% in one quarter previously in 2021, which is a level near to where the Class B layers of Vitality Re might have been attached.
Its no surprise that the notes didnt price down, offered the potential threat of the pandemic to these notes, as well as ILS fund and financier need for higher-returns in a market that has been firming.
You can read everything about this Vitality Re XIII Ltd (Series 2022) medical insurance ILS transaction from Aetna in our extensive Artemis Deal Directory.

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