September 5, 2017 / 8:28 PM / in 10 months

Fitch Rates Cigna Corporations Debt Issue 'BBB+'

(The following statement was released by the rating agency) CHICAGO, September 05 (Fitch) Fitch Ratings has assigned a 'BBB+' rating to 10- and 30-year senior unsecured notes issued by Cigna Corporation (Cigna). The new notes will be used to fund a tender offer of seven series of outstanding senior notes as well as prefund debt maturing in early 2018. The ratings are equivalent to Fitch's ratings on Cigna's currently outstanding senior notes. KEY RATING DRIVERS Cigna is issuing up to $1.6 billion in new 10- and 30-year senior unsecured notes to support the tender offer up to $1 billion principal amount of the following series of outstanding senior notes: 8.3% notes due 2023, 7.65% notes due 2023, 7.875% debentures due 2027, 8.3% step down notes due 2033, 6.15% notes due 2036, 5.875% notes due 2041 and 5.375% notes due 2042. The new senior notes will also fund $131 million of senior notes maturing in March 2018 and will replenish cash used to pay $250 million of senior notes that matured in the first quarter of 2017. No rating sensitivities were triggered when Fitch calculated pro forma June 30, 2017 leverage ratios added $800 million of new debt on a net basis. Cigna's Financial Leverage ratio would increase to an estimated 28% from 25% at June 30, 2017 and Debt-to-EBITDA would increase to 1.3x from 1.1x at June 30, 2017. Interest coverage at 20x remains very strong in the first half of 2017. The ratio is expected to remain very strong, absorbing a moderate decline with the added debt, while benefiting on the margin from lower coupon rates for the new senior notes. Cigna's ratings continue to be supported by its strong business profile, strong capitalization that is better than peers, and strong debt service capabilities and financial flexibility. RATING SENSITIVITIES Key rating factors for Cigna that could lead to a downgrade include: --Elevated financial leverage measured by debt-to-total capital exceeding 30% or debt-EBITDA above 1.8x could lead to a downgrade. --Deterioration in Cigna's interest coverage ratio below 10x could lead to a downgrade. --A deterioration in capitalization, measured by an NAIC RBC ratio below 270% of the company action level could lead to a downgrade. --Deterioration in Cigna's earnings profile as evidenced by EBITDA/revenue below 8% and net return on average capital ratios below 10% could lead to a downgrade. Key rating factors for Cigna that could lead to an upgrade include: --Lower financial leverage ratios on a sustained basis, specifically debt-EBITDA better than 1.2x and debt-to-capital near 25% could lead to an upgrade. --Stronger risk-based capitalization measured by a NAIC RBC ratio near 350% of the company action level could lead to an upgrade. --Enhanced market position and size/scale comparable to peers rated in the 'AA' category could lead to an upgrade. FULL LIST OF RATING ACTIONS Fitch has assigned the following ratings: Cigna Corp. --Senior notes due September 2027 at 'BBB+'; --Senior notes due September 2047 at 'BBB+'. Contact: Primary Analyst Doug Pawlowski, CFA Senior Director +1-312-368-2054 Fitch Ratings, Inc. 70 West Madison Street Chicago, IL 60602 Secondary Analyst Mark Rouck, CPA, CFA Senior Director +1-312-368-2085 Committee Chairperson James B. Auden, CFA Managing Director +1-312-368-3146 Relevant Rating Committee Date: May 12, 2017 Media Relations: Matthew Robinson, Sydney, Tel: +61 2 8256 0326, Email: Additional information is available on Applicable Criteria Insurance Rating Methodology (pub. 26 Apr 2017) here Additional Disclosures Solicitation Status here Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. 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