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Aetna’s Acquisition Boosts Leverage

Insurers $5.7 bln purchase of Coventry will push debt to 40% of capital.

By Zeke Faux and Alex Nussbaum, Bloomberg | Updated on August 23, 2012

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.

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