Is Coventry For Sale?

[MedSuppPro]

Coventry may be purchased by Aetna (Google it)?

Well that was last week! With all this AIG / Lehman crap agents may need to pull out their E&O policies and review the part that states no coverage for a carrier whom has an AM Best rating lower than A- at time of placement.

 

[retread]

Coventry may be purchased by Aetna (Google it)?

Well that was last week! With all this AIG / Lehman crap agents may need to pull out their E&O policies and review the part that states no coverage for a carrier whom has an AM Best rating lower than A- at time of placement.

Short answer: NO.

1) Rumors of a Coventry takeover have been around for over a year. Stock is trading about $35/sh (down about $10 from Q2) due to PFFS claims. Not a biggie... but with P/E less than 10 and good fundamentals, any company as well run as Coventry is going to be attractive. I'm sure a good looking girl gets a lot of offers, but that doesn't mean she will go out with just any guy! Perhaps Coventry may merge if it is in their best interest. Right now, the mutual relationship with Aetna's Worker's Comp network is beneficial.

2) Present climate indicates a good reason to hold onto cash reserves... e.g. AIG, et al. (Not to mention Goldspan's comment that he has never seen an economic outlook as bad as we are in...) This is no time to go out on a financial limb just to buy out the competition. If something more drastic happens, the picture may change.

3) AM Best rating for Coventry remains at A- as it has since October '07. Coventry is very strong... just a slight dip in the PFFS and Worker's Comp departments. This may be corrected in the near future.

4) My E&O shows nothing of the kind about ratings and coverage... only excludes health plans that go bankrupt. I don't know about yours, but thanks for the cautionary note. I used the impetus to read my policy for the first time!

 

[jdeasy]

If they are sold, maybe it will be to company that will provide better service?

Of course, they could be bought out by a Humana or Pyramid and be even worse than they are now.

 

[midwestbroker]

The same rumor was around but it was Humana in Coventry's place. There was all kinds of rumors that Aetna was looking at Humana. Humana had steady stock growth and was an attractive company. But never happened...

 

[retread]

The same rumor was around but it was Humana in Coventry's place. There was all kinds of rumors that Aetna was looking at Humana. Humana had steady stock growth and was an attractive company. But never happened...

Exactly my point... With AIG as the prime example, cash rich big companies have to consider 'is it worth it?' to gamble in the same manner with the present climate. AIG, once BMOC, is dead now and vultures are picking the bones of its carcass, all in the span of a few weeks. (I know, many experts saw dire consequences of the present management over a year ago) Once a company leverages itself with big acquisition debt like AIG did, one small mis-step can yield a sudden fall, kinda like trying to juggle while ice-skating. AIG was making big profits, but not big enough for its debt load. It was reported that they were making about 10% net profit, but only 1% on assets. A small hiccup in the economy, and they went down.

This is why I don't think Aetna will buy any other company in the short term. Besides, why buy a cow when milk is cheap?... the present cozy relationship with Coventry provides income with low risk.