AM Best has affirmed the Financial Strength Rating (FSR)
of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term
ICR) of “a” of the key life/health subsidiaries, health maintenance
organizations and New Zealand- and Europe-based insurance companies
of Cigna Corporation (Cigna) (headquartered in Bloomfield, CT)
(NYSE:CI), following the completion of Cigna’s acquisition of
Express Scripts Holding Company (Express Scripts). The outlook of
these Credit Ratings (rating) is stable. Concurrently, AM Best has
removed from under review with developing implications and affirmed
the FSR of A- (Excellent) and the Long-Term ICR of “a-” of Medco
Containment Life Insurance Company (Mechanicsburg, PA) and Medco
Containment Insurance Company of New York (Troy, NY) (collectively
referred to Medco Containment Group). The outlook assigned to these
ratings is stable. Both companies are subsidiaries of Express
Scripts and their ultimate parent, Cigna. Additionally, AM Best has
affirmed the FSR of A- (Excellent) and the Long-Term ICRs of “a-”
of the Cigna HealthSpring companies. AM Best also has affirmed the
Long-Term ICRs of “bbb” of Cigna and Cigna Holding Company
(Delaware). In addition, AM Best has affirmed the Long- and
Short-Term Issue Credit Ratings (Long- and Short-Term IR) of Cigna
Holding Company. The outlook of these ratings is stable.
Furthermore, AM Best has assigned a Short-Term IR of AMB-2 to
Cigna. (Please see link below for a detailed listing of the
companies and ratings.)
Lastly, AM Best has withdrawn the indicative Long-Term IRs of
Cigna Holding Company.
The majority of Cigna’s operating entities are collectively
referred to as Cigna Life & Health Group. The ratings of Cigna
Life & Health Group reflect is balance sheet strength, which AM
Best categorizes as strong, as well as its strong operating
performance, favorable business profile and appropriate enterprise
risk management (ERM).
The ratings of Cigna Life & Health Group also reflect high
financial leverage of approximately 49%, and high level of goodwill
at Cigna, the ultimate parent. In addition, there is a significant
execution risk related to the Cigna-Express Scripts merger given
the vertical nature of the transaction. However, Cigna stated its
intention to accelerate de-leveraging from its strong earnings from
its insurance entities and its solid non-regulated earnings from
Express Scripts.
Cigna Life & Health Group’s balance sheet strength
assessment of strong is supported by risk-adjusted capitalization
at the strongest level, as measured by Best’s Capital Adequacy
Ratio, along with good liquidity and cash flows from operations.
The insurance entities have a line of credit from an intermediate
holding company in the event that any of them face cash flow
uncertainties. However, the insurance subsidiaries continue to
provide sizeable dividends in excess of $1 billion a year to the
parent.
Cigna Life & Health Group continues to report strong
earnings, with a five-year return on revenue of 7% and a five-year
return on equity of 28%, while maintaining premium growth. The
earnings stem from Cigna Life & Health Group’s core medical
operations and its group life and disability business. Furthermore,
earnings improved in all lines of business during 2018. Cigna Life
& Health Group continues to have a majority of its medical
business in self-funded employer groups, also known as
administrative services only (ASO).
Cigna Life & Health Group continues to have a strong market
presence in the United States, with its wide array of products,
while maintaining a solid market share in medical insurance,
primarily ASO along with life and disability insurance. Also, Cigna
Life & Health Group continues to grow its Medicare business,
which includes Medicare Supplement and Medicare Advantage, along
with its supplemental business. The acquisition of Express Scripts
may provide Cigna with more cross-selling opportunities due to the
expansion of its customer base.
The ratings of Medco Containment Group reflect its balance sheet
strength, which AM Best categorizes as strongest, as well as its
adequate operating performance, limited business profile and
appropriate ERM.
Medco Containment Group has maintained the strongest level of
risk-adjusted capital despite a slight decline from the prior year
due to dividend payments. The group also has maintained solid
overall liquidity and strong underwriting leverage. These positive
balance sheet attributes are offset by cash-flow uncertainty due to
potential payment delays from the Centers for Medicare &
Medicaid Service (CMS) reconciliation process; however, this is
mitigated by the capital support that Cigna can provide. Medco
Containment Group’s earnings remained positive, although they
declined in 2017 and in 2018, primarily driven by an increase in
management fees paid to the parent. Medco Containment Group
continues to focus on a single line of business, Medicare Part D, a
highly regulated business that is a very competitive market.
The ratings of Cigna Life Insurance Company of Europe S.A.-N.V.
(CLICE) (Belgium) reflect its balance sheet strength, which AM Best
categorizes as very strong, as well as its adequate operating
performance, neutral business profile and appropriate ERM.
Furthermore, the ratings of CLICE factor in rating enhancement from
the Cigna organization. CLICE, together with its sister company,
CIGNA Europe Insurance Company S.A.-N.V. (CEIC) (Belgium), form the
European arm of the Cigna group, and both companies have received
capital injections and operational support from their U.S. parent
in recent years. The ratings of CEIC reflect its strong level of
integration and strategic importance to Cigna’s European operations
as the carrier with a non-life license in Europe.
The ratings of CIGNA Life Insurance New Zealand Limited (CLINZ)
(New Zealand) reflect its balance sheet strength, which AM Best
categorizes as very strong, as well as its adequate operating
performance, neutral business profile and appropriate ERM.
Furthermore, the ratings of CLINZ factor in rating enhancement from
the Cigna group. This reflects AM Best’s expectation that the group
would provide capital support to the subsidiary in the event that
it is unable to maintain appropriate capital adequacy.
A complete listing of Cigna Corporation and its subsidiaries’
FSRs, Long-Term ICRs and Long- and Short-Term IRs also is
available.
This press release relates to Credit Ratings that have been
published on AM 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 see AM Best’s Recent
Rating Activity web page. For additional information
regarding the use and limitations of Credit Rating opinions, please
view Understanding Best’s Credit Ratings. For
information on the proper media use of Best’s Credit Ratings and AM
Best press releases, please view Guide for Media - Proper
Use of Best’s Credit Ratings and AM Best Rating Action Press
Releases.
AM Best is a global rating agency and information provider
with a unique focus on the insurance industry. Visit
www.ambest.com for more information.
Copyright © 2019 by A.M. Best Rating
Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.
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version on businesswire.com: https://www.businesswire.com/news/home/20190104005453/en/
Saurin ParikhFinancial Analyst+1 908 439 2200,
ext. 5030saurin.parikh@ambest.com
Valeria ErmakovaSenior Financial Analyst+44 20
7397 0269valeria.ermakova@ambest.com
Sin Yee ChuahAssociate Financial Analyst+65
6303 5022sinyee.chuah@ambest.com
Christopher SharkeyManager, Public Relations+1
908 439 2200, ext. 5159christopher.sharkey@ambest.com
Jim PeavyDirector, Public Relations+1 908 439
2200, ext. 5644james.peavy@ambest.com
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