A.M. Best Assigns Debt Rating to Cigna Corporation's Senior Unsecured Notes

A.M. Best has assigned a debt rating of “bbb” to the $900 million 3.25% 10-year senior unsecured notes recently issued by Cigna Corporation (Cigna) (Bloomfield, CT) (NYSE:CI). The assigned outlook is positive. Cigna’s existing issuer credit and debt ratings are unchanged.

A.M. Best expects the proceeds from the sale of the notes to be utilized to fully redeem Cigna’s $600 million 2.75% senior notes due 2016 and $251 million 8.50% senior notes due 2019. As Cigna intends to call the notes, the redemption price will include a make-whole premium of approximately $85 million.

A.M. Best notes that Cigna’s financial leverage will be minimally impacted and is expected to remain in the 30% range in the near to medium term. Additionally, the enterprise’s financial flexibility remains sound and interest coverage is expected to remain above 10 times.

Cigna’s ratings reflect its diversified business profile, favorable strategic position within the health insurance market, strong financial performance and good level of risk-adjusted capital. The organization continues to strengthen its position as one of the leading providers of health, group life and disability benefits. Cigna’s relatively low exposure to commercial full-risk and individual business provides a competitive advantage, as the impact of changes and potential membership losses related to the Patient Protection and Affordable Care Act (ACA) implementation are significantly smaller in comparison with its peers. In addition, Cigna’s proven ability to offer Administrative Services Only solutions for the middle market has become an engine for growth, as smaller employers are looking to transition to self-funded plans.

Partially offsetting these strengths is earnings pressure in Cigna’s Global Health Care segment due to ACA fees, increased competition and lower Medicare Advantage reimbursement levels. In addition, Cigna experienced unfavorable financial results in its new individual exchange business in 2014. However, the exchange membership remains small and is not likely to grow substantially in 2015 following pricing actions and product modifications.

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

Key insurance criteria reports utilized:

• Analyzing Insurance Holding Company Liquidity
• Insurance Holding Company and Debt Ratings

This press release relates to rating(s) that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please visit A.M. Best’s Ratings & Criteria Center.

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