AM Best Assigns Issue Credit Ratings to The Cigna Group’s New Senior Unsecured Notes
March 01 2023 - 4:44PM
Business Wire
AM Best has assigned a Long-Term Issue Credit Rating of
“bbb” (Good) to the $700 million, 5.685% senior unsecured notes due
March 15, 2026, and the $800 million, 5.4% senior unsecured notes
due March 15, 2033, recently issued by The Cigna Group (Cigna)
(headquartered in Bloomfield, CT) [NYSE:CI]. The outlook assigned
to these Credit Ratings (ratings) is positive. The existing ratings
of Cigna and its subsidiaries are unchanged.
The proceeds from the issuance will be used to pay down upcoming
debt maturities and for general corporate purposes. Cigna has close
to $3 billion of senior unsecured notes coming due throughout 2023.
Cigna’s financial leverage was 40.9% at year-end 2022, which is in
line with its peers. Financial leverage has moderated substantially
over the past several years following the $67 billion acquisition
of Express Scripts in late 2018. Financial leverage is expected to
increase slightly after the new debt issuance but will return to
the 40% range as maturities are paid. Cigna’s earnings before
interest and taxes interest coverage improved in 2022 to over 8.2
times compared with 6.5 times in 2021 due to stronger earnings.
Cigna’s earnings from health care operations grew 13% in 2022
compared with 2021 as medical cost ratio posted a 230 basis points
improvement mainly driven by lower COVID-19 claims and pricing
initiatives. Non-regulated earnings at the Evernorth segment
improved by 5% supported by revenue growth. The Evernorth segment
comprised about 75% of revenues, and 53% of earnings from
operations for the enterprise-reducing pressure for dividends form
the insurance subsidiaries. The dividends from Cigna insurance
entities declined to $1.9 billon in 2022 from $2.8 billion and $2.3
billion in 2021 and 2020, respectively.
In addition to operating earnings, Cigna’s financial position
was enhanced through $5.5 billion of proceeds from divestiture of
its Asia-Pacific insurance operations completed in mid-2022. The
proceeds from the sale were used primarily for share repurchase.
Cigna repurchased $7.6 billion worth of shares in 2022, slightly
lower compared with 2021. Furthermore, Cigna paid a cash dividend
of $1.4 billion in 2022 and announced a 10% increase in dividend
for 2023.
Cigna maintains good liquidity and financial flexibility through
parent company cash, a commercial paper program and several credit
facilities, as well as the ability to borrow up to $3 billion from
the insurance subsidiaries without additional authorizations. There
was no commercial paper outstanding or any borrowing against credit
facilities at year-end 2022.
Goodwill and intangibles assets remain high at approximately
100% of shareholders equity. However, the ratio declined from over
150% in 2018 when the purchase of Express Scripts was completed. In
addition, high goodwill/intangibles is tied primarily to
non-insurance operations, which continue to produce stable earnings
and provide a substantial degree of diversification.
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 Guide to Best's Credit Ratings. For information
on the proper use of Best’s Credit Ratings, Best’s Performance
Assessments, Best’s Preliminary Credit Assessments and AM Best
press releases, please view Guide to Proper Use of Best’s
Ratings & Assessments.
AM Best is a global credit rating agency, news publisher and
data analytics provider specializing in the insurance industry.
Headquartered in the United States, the company does business in
over 100 countries with regional offices in London, Amsterdam,
Dubai, Hong Kong, Singapore and Mexico City. For more information,
visit www.ambest.com.
Copyright © 2023 by A.M. Best Rating
Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.
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Joseph Zazzera Director +1 908 439 2200, ext.
5797 joseph.zazzera@ambest.com
Christopher Sharkey Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com
Doniella Pliss Director +1 908 439 2200, ext.
5104 doniella.pliss@ambest.com
Al Slavin Senior Public Relations Specialist +1
908 439 2200, ext. 5098 al.slavin@ambest.com
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