AM Best has assigned Long-Term Issue Credit Ratings of “bbb” to the $500 million .613% senior unsecured notes due 2024, $800 million 1.25% senior unsecured notes due 2026, $1.5 billion 2.375% senior unsecured notes due 2031 and $1.5 billion 3.4% senior unsecured notes due 2051 recently issued by Cigna Corporation (Cigna) (headquartered in Bloomfield, CT) [NYSE:CI]. The outlook assigned to these Credit Ratings (ratings) is stable. The existing ratings of Cigna and its subsidiaries are unchanged. The proceeds of the recent $4.3 billion of aggregate debt, issued on March 1, 2021, will be used to redeem upcoming 2021, 2022 and 2023 issues held at various entities, as well as for general corporate purposes.
AM Best notes that Cigna has maintained relatively high financial leverage, which had come down to just over 39% at year-end 2020 and coverage improving noticeably given strong earnings reported for the year. While the March 2021 debt issues will be used to redeem upcoming 2021, 2022 and 2023 maturities, with additional legacy Cigna Holding Company debt also maturing this month, this debt issue will cause a temporary increase in financial leverage in the interim. However, Cigna has moderated its leverage post transaction, which was over 50% at the time of the close of the Express Scripts, Inc. acquisition. Cigna remains committed to deleveraging, and management has indicated it expects the company’s financial leverage to return to its targeted range of below 40% by year-end 2021.
AM Best expects Cigna’s financial deleveraging to be driven by the stronger earnings reported in 2020 and related dividends from Cigna’s insurance entities, solid nonregulated earnings from its Evernorth health services segment and additional one-time capital sources, such as a portion of the proceeds from the sale of its group employee benefits business - which closed at year-end 2020 - to help reduce outstanding debt.
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