TEXT-Fitch cuts Loyal American Life Insurance Co rating

Tue Sep 4, 2012 11:03am EDT

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(The following statement was released by the rating agency)
    Sept 4 - Fitch Ratings has downgraded the Insurer Financial Strength (IFS)
ratings of Loyal American Life Insurance Company (Loyal) and Central Reserve
Life Insurance Company (Central Reserve), following their acquisition by Cigna,
to 'A' from 'A+'. The Rating Outlooks are Stable. 

Cigna's ratings are unaffected by today's rating action as Fitch views the 
acquisitions' impact on Cigna's credit-quality as modest. The 'A' IFS ratings of
Loyal and Central Reserve are consistent with Fitch's IFS ratings on other Cigna
insurance operating subsidiaries.   

Cigna paid $305 million for Great American Supplemental Benefits Group, which 
consisted of the following five entities: Loyal American Life Insurance Co., 
Central Reserve Life Insurance Co., American Retirement Life Insurance Co., 
Provident American Life Insurance Co. and United Benefit Life Insurance Co.

The acquired companies will now do business as Cigna Supplemental Benefits.

Fitch believes that going forward, the IFS ratings of Loyal and Central Reserve 
will move with the IFS ratings of Cigna's various other subsidiaries. Rating 
triggers for Cigna are listed below.

The key rating triggers that could result in an upgrade include:

--A change in run-rate debt-to-total capital toward 25%; 

--A reduction in run-rate earnings and capital volatility associated with 
run-off segments or a more fully funded pension.

The key rating triggers that could lead to a downgrade include:

--Failure to make meaningful progress in reducing debt-to-total capital toward 
Fitch's median guideline of 30% for the current rating category; 

--A material increase in either losses from Cigna's run-off business segments or
pension funding requirements;

--Deterioration in capitalization, measured by an NAIC RBC ratio below 250% of 
the CAL;

Fitch has downgraded the following ratings:

Loyal American Life Insurance Company
Central Reserve Life Insurance Company

--Insurer Financial Strength (IFS) ratings to 'A' from 'A+'; Rating Outlook 
Stable.

 (Caryn Trokie, New York Ratings Unit)
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