Aetna is returning to market with its sixth offering of bonds transferring the risk of a spike in health insurance claims.

Vitality Re VI provides Aetna with three years of coverage; the insurer was last in the market a year ago, in January 2014, with Vitality Re V, which was a five-year transaction.

Goldman Sachs is the sole bookrunner and co-structuring agent of the latest deal; BNP Paribas is co-manager and co-structuring agent.

Standard & Poor's Ratings Services has assigned preliminary ratings of 'BBB+' to the class A notes, initially sized at $140 million, and 'BB+' to the class B notes, initially sized at $60 million.

Under the structure, Aetna will deposit proceeds from the sale of the notes  into a separate collateral account for each class of notes, and the trustee will purchase one or more Treasury money-market funds rated at least 'AAA' by S&P. In the event that the medical benefits ratio exceeds 94%, proceeds of the B notes will be available to pay claims.

S&P’s presale report does not indicate how this ratio is calculated, except that it occurs on an annual aggregate basis. However the rating agency states the highest level for the covered business since 2007 was 88.5% in 2009.

For the first nine months of 2014, the ratio rose to 81.4% from 80.7% in the same period for 2013. “The increase was driven by a percentage increase in per-member health-care costs that outpaced the percentage increase in per-member premiums,” S&P states in the presale report. “This was driven by substantial growth in certain higher MBR businesses and costs associated with new hepatitis C treatments, and partially offset by pricing actions designed to recover fees and taxes mandated by health-care reform.”

Aetna will not be able to use proceeds from the issuance of the A notes unless the medical benefits ratio exceeds 100%.

This is the sixth bond that S&P has rated covering health-care claims, and is insuring the same risk as the other five (two currently outstanding) Vitality issuances. 

Two tranches of protection provided by Aetna’s Vitality Re III deal, which gave the health insurer $150 million of cover, both matured this week, according to tracker Artemis. So the Vitality Re VI deal will replace some of that protection. 

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