CVS To Keep Aetna In Hartford, Says City is ‘Center of Excellence’ for Insurance

Jan. 13--CVS Health Corp., which is buying Aetna Inc. for $69 billion, said Friday it will keep the health insurer in Hartford, where it has been headquartered since 1853.

The announcement, in an email from CVS spokesman David Palombi, ends months of speculation about the location of Aetna, which sought unsuccessfully to move to New York City.

"We have no plans to relocate Aetna's operations from Hartford and, in fact, view Hartford as the future location of our center of excellence for the insurance business," he said.

CVS will continue to be based in Woonsocket, R.I., Palombi said in an email. The company operates corporate hubs, or centers of excellence as the company calls the sites, in Arizona, Illinois and Texas.

Palombi did not say how many workers will be at the Farmington Avenue site -- if CVS continues to use it -- or what functions will be performed in Hartford where about 4,000 employees work. Aetna has 5,800 jobs in Connecticut.

CVS's chief executive Larry Merlo met with Hartford Mayor Luke Bronin at city hall Thursday. He also met with Gov. Dannel P. Malloy.

"We met at my office, and we had a good, productive discussion about CVS Health's proud position as a New England-based company, about Aetna's long, proud history here and about our eagerness to partner with them as the deal goes forward," Bronin said in an interview Friday after speaking at CBRE-New England's annual commercial real estate conference in Hartford.

Bronin said it is crucial to position Connecticut to compete to retain as many jobs in the merger and build a foundation for growth.

"I shared my view of the Hartford region, its tremendous talent pool, depth of experience in insurance, that this the perfect place for them to keep and grow the center of their insurance operations," Bronin said.

David Souder, associate dean for graduate programs at the UConn School of Business, said Hartford has an advantage because it has been at the center of an insurance "cluster. Clusters, he said, concentrate expertise and innovation in a certain geographic area, much like technology in Silicon Valley and finance in New York City.

In the Hartford region, "we see lots of current initiatives to incorporate new technology and product ideas to help the industry evolve with the times," said Souder, who has published research on mergers and acquisitions. "As long as investments are being made to keep an industry current, then there are good reasons for existing firms to stay located in a cluster, and for new firms to start up around them."

Detroit, Souder said, lost its edge in automotive manufacturing when it stopped evolving, took customers for granted and opened the door for other manufacturers to compete by opening lower-cost plants in other regions.

"Ongoing innovation helps clusters grow and thrive together, while complacency and stagnation make it easier for new competitors to locate elsewhere," Souder said.

Malloy's office confirmed Friday there have been discussions with CVS about the location of the Aetna headquarters since the deal was announced Dec. 3. Those discussions were followed up by a meeting Thursday between Malloy and Merlo.

"My administration will continue to work with CVS Health's leadership team to ensure that their footprint in Hartford is maintained not only for the short-term, but the long-run as well," Malloy said, in an emailed statement.

James C. Smith, the retired chief executive of Webster Bank and co-chairman of the state Commission on Fiscal Stability and Economic Growth, said the CVS decision is good for Connecticut in the short term.

"Over the long term, we'll have to see what drove the decision," he said.

Where Aetna would continue to do business has been unclear since the insurer and CVS announced their mega-merger. Five months earlier, Aetna said it would move it's headquarters to New York City in search of high-tech workers.

But after the deal was struck, CVS said in regulatory filings that all locations were under review, putting in doubt Aetna's proposed $85 million Manhattan headquarters.

The administration of New York Mayor Bill de Blasio recently canceled an incentive package to Aetna.

Aetna's announcement June 29 that it would move to New York was a blow to Hartford and Connecticut. Its planned move followed by just 18 months the announcement of General Electric Co. that it will relocate to Boston.

Aetna Chief Executive Officer Mark Bertolini said the company was moving in search of high-tech workers. He also rapped Connecticut over its lengthy state budget impasse and fiscal uncertainty.

At a conference in California in November, Bertolini said Aetna employees were eager to leave Hartford for Manhattan.

When he asked who wants to relocate to New York City, "everybody's hand went up," he said. "It's more about quality of life."

If approved, CVS's acquisition of Aetna -- one of the largest ever in health care -- has the potential to reshape the industry. The merged company would combine a provider of pharmacy benefits and a coast-to-coast drugstore chain with a growing number of in-store clinics with a health insurer with 22 million medical members.

CVS and Aetna have few overlapping operations because they are in different businesses. That, experts say, is a good sign for Hartford, at least in the near future. There may be some overlapping corporate positions between the two companies where decisions about reductions will still need to be made after the merger, they said.

___

(c)2018 The Hartford Courant (Hartford, Conn.)

Visit The Hartford Courant (Hartford, Conn.) at www.courant.com

Distributed by Tribune Content Agency, LLC.