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S&P puts Humana, Aetna under review after merger lawsuit

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Standard & Poor's Corp. on Friday placed Humana Inc. under review with negative implications following the U.S. Justice Department's Thursday lawsuit to block the health insurer's $37 billion merger with Aetna Inc.

“We believe a deal termination would likely have a negative impact on Humana's credit profile because of the removal of benefit associated with being a core component of a larger, more well-diversified enterprise,” S&P said in a report issued Friday.

The New York-based ratings agency also put Hartford, Connecticut-based Aetna under review, as there's a chance S&P will bump Aetna's rating up a notch if the merger deal ultimately falls through, citing the avoidance of financial and integration risk that could come from the deal.

Still, the time it takes to litigate the Justice Department's lawsuit, which Aetna and Louisville, Kentucky-based Humana vowed Thursday to fight, could worsen financial leverage and debt service through 2017, having a negative effect on Aetna's financial position, according to the report.

S&P on Friday also said Indianapolis-based Anthem Inc. and Bloomfield, Connecticut-based Cigna Corp., whose $54 billion merger was challenged by the Justice Department on Thursday as well, will both remain on negative watch, where they were placed June 2015.

If the insurers back out of the merger deal, S&P said it could remove the ratings of both companies from its negative watch list. But if Anthem and Cigna choose the “difficult and time-consuming” route of fighting the lawsuit in court, their ratings could be downgraded “upon deal financing,” according to the report.