CVS Health announces transaction With Vitality Re X

Thursday, January 24, 2019

WOONSOCKET, R.I. — CVS Health (NYSE: CVS) today announced that Aetna, a CVS Health business, has entered into a four-year reinsurance arrangement with Vitality Re X Limited as part of its long-term capital management strategy. The arrangement allows CVS Health to reduce its required capital and provides $200 million of collateralized excess of loss reinsurance coverage on a portion of Aetna's group commercial health insurance business.Amounts payable under the reinsurance arrangement are based on the annual medical benefit ratio ("MBR") of a portion of Aetna Life Insurance Company's group commercial PPO, POS and indemnity business compared to a threshold attachment point specified in the applicable reinsurance arrangement. The principal amount of the Vitality Re X notes, which are non-recourse to CVS Health and Aetna, and the coverage available under the reinsurance arrangement will be reduced by any payments to Aetna under the reinsurance arrangement. Aetna will be entitled to begin to receive payments from Vitality Re X under the reinsurance arrangement if the MBR of the covered business for calendar year 2019 reaches an initial attachment point of 98%. The full $200 million of coverage would be paid to Aetna if the MBR of the covered business reaches an initial exhaustion point of 118% for calendar year 2019. The attachment and exhaustion points will be reset annually for 2020, 2021 and 2022 to maintain modeled probabilities of attachment and expected loss on the Vitality Re X notes equal to the initial modeled probabilities of attachment and expected loss. Vitality Re X Limited is a newly formed insurance company which issued health insurance-linked notes in a private offering in connection with this transaction.

"Today's transaction marks the successful completion of the tenth reinsurance arrangement under the Vitality Re program," said CVS Health Chief Financial Officer Eva Boratto. "The Vitality Re program is an important component of our capital structure that lowers our cost of capital and drives capital efficiency."

About CVS Health

CVS Health is the nation's premier health innovation company helping people on their path to better health. Whether in one of its pharmacies or through its health services and plans, CVS Health is pioneering a bold new approach to total health by making quality care more affordable, accessible, simple and seamless. CVS Health is community-based and locally focused, engaging consumers with the care they need when and where they need it. The Company has more than 9,800 retail locations, approximately 1,100 walk-in medical clinics, a leading pharmacy benefits manager with approximately 93 million plan members, a dedicated senior pharmacy care business serving more than one million patients per year, expanding specialty pharmacy services, and a leading stand-alone Medicare Part D prescription drug plan. CVS Health also serves an estimated 39 million people through traditional, voluntary and consumer-directed health insurance products and related services, including a rapidly expanding Medicare Advantage offering. This innovative health care model increases access to quality care, delivers better health outcomes and lowers overall health care costs. Find more information about how CVS Health is shaping the future of health at