Aetna (AET), a diversified health care benefits company, has signed a five-year reinsurance arrangement with Vitality Re V as part of its long-term capital management strategy.
The deal will enable Aetna to cut down on its required capital, while offering $200m of collateralized excess of loss reinsurance coverage on a portion of Aetna’s group commercial health insurance business.
Vitality Re V is an insurance startup, which issues health insurance-linked notes in a private offering in connection with this transaction.
Aetna’s arrangements with Vitality Re and Vitality Re II expired on 7 January 2014, according to the reinsurance company.
Commenting on the deal, Aetna treasurer J Lankford Wade said, "This reinsurance arrangement improves our capital efficiency and reduces our weighted average cost of capital.
"Today’s transaction, which essentially replaces the Vitality Re II arrangement, marks the successful completion of our fifth such reinsurance arrangement."
Aetna provides an array of traditional, voluntary and consumer-directed health insurance products and related services, such as medical, pharmacy, dental, behavioral health, group life and disability plans, and medical management capabilities, among others.
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Image: The Aetna building in Hartford. Photo Courtesy of: grendel|khan.