A.M. Best Affirms Ratings of Cigna Corporationand Its Subsidiaries

Thu Feb 14, 2013 12:10pm EST

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OLDWICK, N.J.--(Business Wire)--
A.M. Best Co. has affirmed the issuer credit rating (ICR) of "bbb" and debt
ratings of Cigna Corporation (Cigna) (Philadelphia, PA) (NYSE: CI).
Concurrently, A.M. Best has affirmed the financial strength rating (FSR) of A
(Excellent) and ICRs of "a" of the key life/health subsidiaries of Cigna, as
well as its medical health maintenance organizations (HMO) and dental HMO
subsidiaries. Additionally, A.M. Best has assigned an FSR of A- (Excellent) and
ICRs of "a-" to the HealthSpring subsidiaries that were acquired by Cigna in
January 2012. 

A.M. Best also has affirmed the FSR of A- (Excellent) and ICRs of "a-" of three
of the Cigna supplemental benefit companies, and upgraded the FSR to A-
(Excellent) from B++ (Good) and ICR to "a-" from "bbb" of American Retirement
Life Insurance Company (American Retirement Life) (Austin, TX). The outlook for
all the above ratings is stable. (See link below for a detailed listing of the
companies and ratings.) 

In addition, A.M. Best has withdrawn the FSR of A (Excellent) and ICR of "a" of
Cigna Arbor Life Insurance Company (Cigna Arbor) (Bloomfield, CT). Cigna Arbor`s
role as reinsurer of Connecticut General Life Insurance Company`s (CGLIC) run
off Guaranteed Minimum Death Benefit and Guaranteed Minimum Income Benefit
business will be discontinued following CGLIC`s agreement to reinsure the
run-off business to Berkshire Hathaway Life Insurance Company of Nebraska. 

The rating affirmations reflect Cigna`s strong financial performance and growing
business diversification. Cigna`s health, life and disability insurance entities
have reported consistently strong earnings with return on revenues typically
exceeding 5%. The acquisitions of HealthSpring and Great American`s supplemental
business helped Cigna to further diversify its product portfolio and achieve an
established position within the senior health care market, reducing its
concentration in health care administrative service only (ASO) type contracts.
A.M. Best believes Cigna is well positioned for future earnings growth, as the
organization has been implementing various cost control tools in its health care
segment, including expanding accountable care organizations with providers.
Furthermore, the organization has growing international operations in both its
Asian and European domiciled subsidiaries. 

Moreover, A.M. Best views favorably Cigna's reinsurance agreement with Berkshire
Hathaway Life Insurance Company of Nebraska, as it eliminates potential earnings
volatility related to run-off variable annuities business and allows Cigna to
focus resources on its core segments. 

Partially offsetting these strengths are the declining margins in Cigna`s health
care and disability segments. Cigna`s earnings and revenues remain strong with
significant growth year over year largely due to the HealthSpring acquisition.
However, overall margins have declined due in part to the added volume of
Medicare Advantage business, which typically has a higher loss ratio than
commercial business. In addition, the increased financial leverage at the
holding company, which declined slightly in 2012 to approximately 34% from 37% a
year earlier, might place pressure on the operating companies` capital levels. 

The ratings of the HealthSpring subsidiaries reflect its trend in membership
growth, strong earnings and the strategic role of the Medicare Advantage product
and HealthSpring business model for the Cigna organization. The consolidated
HealthSpring subsidiaries have had consistent membership growth in both Medicare
Advantage and Medicare Prescription Drug Coverage, Part D, over the past few
years. Earnings have been solid with return on revenues in the 3%-4% range.
Additionally, the HealthSpring subsidiaries provide Cigna with an entrance into
the Medicare Advantage segment as well as the HealthSpring organization`s
knowledge and experience with collaborative care provider relationships. 

Key rating drivers that may lead to positive rating actions on the ratings of
Cigna and its subsidiaries include stability of earnings, enhanced risk-adjusted
capital at the operating subsidiaries and a reduction in financial leverage. Key
rating drivers that may lead to negative rating actions include a further
increase in financial leverage beyond A.M. Best's expectation; deterioration in
interest coverage; a decline in risk-adjusted capital at Cigna's lead operating
entity, CGLIC; a significant weakening of operating performance; or material
impairments within the investment portfolio. 

For a complete list of Cigna Corporation and its subsidiaries` FSRs, ICRs and
debt ratings, please see www.ambest.com/press/021404CIGNA.pdf. 

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

Founded in 1899, A.M. Best Company is the world`s oldest and most authoritative
insurance rating and information source. For more information, visit

Copyright © 2013 by A.M. Best Company, Inc.ALL RIGHTS RESERVED.

A.M. Best Co.
Doniella Pliss,908-439-2200, ext. 5104
Senior Financial Analyst
Sally Rosen,908-439-2200, ext. 5280
Assistant Vice President
Rachelle Morrow, 908-439-2200, ext. 5378
Senior Manager, Public Relations
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations

Copyright Business Wire 2013

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