Coventry Health Care — Merger or Acquisition (August 2012)
29 slides from Coventry Health Care's merger presentation, Aug 20, 2012
Slide 1: Aetna to Acquire Coventry
[aetna logo] Aetna to Acquire Coventry AUGUST 20, 2012
Slide 2: Participants
Participants Mark Bertolini Chairman, Chief Executive Officer and President, Aetna Inc. Allen Wise Chairman and Chief Executive Officer, Coventry Health Care, Inc. Joseph Zubretsky Senior Executive Vice President and Chief Financial Officer, Aetna Inc. Aetna + Coventry | August 20, 2012 Aetna Inc. 2
Slide 3: Important Information For Investors And Shareholders
Important Information For Investors And Shareholders This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. Aetna Inc. (�Aetna�) will file with the Securities and Exchange Commission (�SEC�) a registrat
Slide 4: Cautionary Statement
Cautionary Statement Statements in this document that are forward-looking, including Aetna�s projections as to the anticipated benefits of the pending transaction to Aetna, pro forma impact of the pending transaction on membership, revenues, EBITDA, business mix, premiums, parent cash flow, intangib
Slide 5: Additional Cautionary Statement
Additional Cautionary Statement Statements in this document regarding Coventry that are forward-looking, including but not limited to the anticipated benefits of the transaction to Coventry, the projected closing date, the closing of the transaction, and the projected membership additions to Aetna,
Slide 6: Agenda
Agenda o Transaction Overview o Strategic Rationale o Financial Overview o Conclusion Aetna + Coventry | August 20, 2012 Aetna Inc. 6
Slide 7: Strengthening the Core and Positioning for Growth
Strengthening the Core and Positioning for Growth [aetna logo] [coventry logo] o Aetna�s acquisition of Coventry adds over 5 million total members - Adds nearly 4 million medical members and 1.5 million PDP members - Adds a growing Individual Medicare Advantage business - Substantially increases our
Slide 8: Key Transaction Terms
Key Transaction Terms Purchase Price o $42.08 per Coventry share in cash and stock, based on Friday�s close o Total transaction value of $7.3B, including assumption of Coventry debt Projected Financial Impact o Modestly accretive to Operating EPS in 2013 o $0.45 accretive to Operating EPS in 2014 o
Slide 9: Agenda
Agenda o Transaction Overview o Strategic Rationale o Financial Overview o Conclusion Aetna + Coventry | August 20, 2012 Aetna Inc. 9
Slide 10: Compelling Strategic Rationale
Compelling Strategic Rationale Improved Increased Increased Positioning and Enhanced Financially Membership Government Reach in Capabilities Attractive and Programs Consumer Based for 2014 and and Highly Diversification Presence Businesses Beyond Accretive [graphic omitted] [graphic omitted] [graphi
Slide 11: Increased Medical Membership and Revenues
Increased Medical Membership and Revenues [graphic omitted] Pro forma for the Coventry acquisition Aetna will have 22 million medical members and 2012E Revenues of $50 billion Note: Membership data in millions as of June 30, 2012; Medical Membership does not include Medicare PDP; 2012E Revenues base
Slide 12: Increased Revenue Diversification
Increased Revenue Diversification [graphic omitted] Over 30% of Aetna's pro forma 2012E Revenues will come from Government programs Note: 2012E Revenues are based on Company guidance. See notes at end of presentation for additional disclosures on financial metrics. Aetna + Coventry | August 20, 2012
Slide 13: A Top Player Across All Major Government Programs
A Top Player Across All Major Government Programs [graphic omitted] Combination meaningfully improves Aetna's Government footprint Note: Membership as of June 30, 2012. Medicaid membership includes the Kansas contract, which was not renewed for 2013. Combined Aetna + Coventry membership is pro forma
Slide 14: Well Rounded Medicare Portfolio
Well Rounded Medicare Portfolio o 55% of combined o 45% of combined Medicare Advantage Medicare Advantage membership membership o Coventry adds a o Substantial commercial network of over conversion 5,500 licensed [graphic omitted] opportunities agents o Rounds out product portfolio with o Strengthen
Slide 15: Improved Medicaid and Dual Eligibles Positioning
Improved Medicaid and Dual Eligibles Positioning [graphic omitted] o Doubles etna�s pro forma Medicaid revenues o Triples Aetna�s pro forma Medicaid risk membership o Aetna�s pro forma Medicaid footprint will cover 14 states where over one third of all Medicaid and Dual Eligible members reside Combi
Slide 16: Enhanced Geographic Profile
Enhanced Geographic Profile [graphic omitted] o Adds nearly 4 million medical members and 1.5 million PDP members o Increases medical membership in two of Aetna�s top 10 States o Opens other geographies where Aetna historically has not had a strong presence Transaction enhances geographic footprint
Slide 17: Complementary Commercial Insured Profile
Complementary Commercial Insured Profile [graphic omitted] o Over $26 billion of 2012E pro forma Commercial Insured Premiums o Pro forma Commercial Insured business maintains a balanced distribution o Over 2 million pro forma Small Group and Individual Members spanning almost 40 States Coventrys' fo
Slide 18: Enhanced Capabilities for 2014 and Beyond
Enhanced Capabilities for 2014 and Beyond [graphic omitted] [graphic omitted] [graphic omitted] o Increased presence in o Local provider o Build sustainable Individual business to relationships and low long-term model by position Aetna for cost structure are aligning provider growth via the attracti
Slide 19: Agenda
Agenda o Transaction Overview o Strategic Rationale o Financial Overview o Conclusion Aetna + Coventry | August 20, 2012 Aetna Inc. 19
Slide 20: Investment Highlights
Investment Highlights |X| Increased membership, while maintaining a balanced and diversified portfolio of businesses |X| Responsibly expanding Aetna�s Medicare and Medicaid businesses at a valuation more aligned with diversified managed care players |X| Expanding our presence and enhancing our capab
Slide 21: Aetna + Coventry at a Glance
Aetna + Coventry at a Glance [graphic omitted] Note: Membership as of June 30, 2012 in thousands. Combined Aetna + Coventry metrics are estimated and / or pro forma. See notes at end of presentation for additional disclosures on financial metrics. Aetna + Coventry | August 20, 2012 Aetna Inc. 21
Slide 22: Purchase Price, Synergies and Integration Costs
Purchase Price o Purchase price of $42.08 per share, based on Friday�s close - $27.30 per share in cash consideration - 0.3885 shares of Aetna stock per Coventry share - Implied consideration mix: 65% Cash and 35% Stock o Premium of 29% based on 30-day average closing price Synergies o Synergies of
Slide 23: Financial Impact
Financial Impact [graphic omitted] Note: Estimates based on current projections. Transaction and Integration costs are excluded from Operating EPS impacts in all periods. Synergies, transaction costs and integration costs are pre-tax. See notes at end of presentation for additional disclosures on fi
Slide 24: Sources and Uses of Funds
Sources and Uses of Funds [graphic omitted] The average interest rate on Aetna's transction debt is projected to be less than 3% Note: Excludes transaction expenses. Aetna + Coventry | August 20, 2012 Aetna Inc. 24
Slide 25: Cash Flow and Capital Management
Cash Flow and Capital Management Cash Flows o 2012 pro forma EBITDA of over $4B o 2012 pro forma Parent Cash Flow of $2.2B o Deal related amortization of up to $125 million per year Debt-to-Total Capitalization Ratio o Expected to be ~40% at closing o Projected to return to ~35% over two years Risk
Slide 26: Key Steps for a Successful Integration
Key Steps for a Successful Integration [graphic omitted] Aetna's recent integration experience gives us great confidence in our ability to execute on our plans Aetna + Coventry | August 20, 2012 Aetna Inc. 26
Slide 27: Agenda
Agenda o Transaction Overview o Strategic Rationale o Financial Overview o Conclusion Aetna + Coventry | August 20, 2012 Aetna Inc. 27
Slide 28: Strengthening the Core and Positioning for Growth
Strengthening the Core and Positioning for Growth [graphic omitted] o Aetna�s acquisition of Coventry adds over 5 million total members - Adds nearly 4 million medical members and 1.5 million PDP members - Adds a growing Individual Medicare Advantage business - Substantially increases our Medicaid f
Slide 29: Notes
Notes 1. Projected operating earnings per share, projected EBITDA, and projected return on invested capital (ROIC) exclude from net income any net realized capital gains or losses and other items, if any, that neither relate to the ordinary course of our business nor reflect our underlying business
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