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 U.S. life/health subsidiaries, health
maintenance organizations and Europe-based insurance companies of
Cigna Corporation (Cigna) (headquartered in Bloomfield, CT) [NYSE:
CI]. Concurrently, AM Best has upgraded the FSR to A (Excellent)
from A- (Excellent) and the Long-Term ICRs to “a” from “a-” of
Medco Containment Life Insurance Company (Warrendale, PA) and Medco
Containment Insurance Company of New York (Troy, NY) (collectively
referred to as Medco Containment Group). Additionally, AM Best has
upgraded the FSR to A (Excellent) from A- (Excellent) and the
Long-Term ICRs to “a” from “a-” of the Cigna HealthSpring Companies
(HealthSpring). AM Best also has affirmed the Long-Term ICR of
“bbb” and the Short-Term Issue Credit Rating (Short-Term IR) of
AMB-2 of Cigna. The outlook of these Credit Ratings (ratings) is
stable. Furthermore, AM Best has withdrawn the Long-Term ICR of
“bbb” and the Short-Term IR of AMB-2 on the intermediate holding
company, Cigna Holding Company (Delaware). Lastly, AM Best has
affirmed the Long-Term Issue Ratings (Long-Term IR) of Cigna
Holding Company. The outlook of these ratings is stable. (Please
see link below for a detailed listing of the companies and
ratings.)
The majority of Cigna’s U.S. operating entities are collectively
referred to as Cigna Life & Health Group. The ratings of Cigna
Life & Health Group reflect its 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 46% and the high level of
goodwill at Cigna, the ultimate parent. In addition, execution risk
related to the Cigna-Express Scripts merger remains, given the
transaction’s complexity. However, Cigna has moderated its leverage
post transaction, which was over 50%, and has indicated that it
remains committed to an accelerated de-leveraging during 2020,
which is expected to leave financial leverage closer to 40% by the
end of the year. AM Best expects the lower financial leverage to be
driven by the strong earnings and dividends from Cigna’s insurance
entities, solid non-regulated earnings from its Health Services
segment and additional one-time capital sources, such as a portion
of the proceeds from the pending sale of its group employee
benefits business, which is expected to help reduce outstanding
debt.
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 (BCAR), along with excellent sources of liquidity supported
by strong metrics and operating cash flows across its diverse
businesses. The insurance entities have access to cash from the
parent in the event any cash flow or capital is needed.
Additionally, Cigna’s insurance subsidiaries have consistently
provided cash flow upstream in the form of dividends, generally in
excess of $1 billion a year. The dividend payments were higher for
full-year 2019, given favorable operating results.
Cigna Life & Health Group reported strong earnings again in
2019, with consistently strong profitability ratios. The earnings
and profit margins have been driven by Cigna Life & Health
Group’s core commercial and Medicare-related operations.
Furthermore, earnings improved across its core lines of business in
2019. AM Best also notes that Cigna Life & Health Group
continues to have a majority of its commercial business in
self-funded/administrative services only (ASO) employer groups.
Premium growth has been increasing and is expected to continue into
2020.
AM Best views Cigna Life & Health Group’s business profile
as favorable, driven by the group’s market presence in the United
States, with its wide array of products and a solid market share in
the medical insurance space. In addition, Cigna Life & Health
Group continues to grow its government segment, primarily
Medicare-related business, which includes Medicare supplement and
Medicare Advantage (MA) and MA-Part D, along with its other
ancillary/supplemental businesses. The acquisition of Express
Scripts will provide Cigna cross-selling opportunities, and the
aforementioned premium growth, 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. Additionally, the rating upgrades reflect AM
Best’s view of the strategic position Medco plays as a core part of
Cigna’s Medicare Part D offerings.
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 sustained solid
overall liquidity and strong premium leverage. Given the nature of
this business, the balance sheet positives are offset somewhat by
cash-flow uncertainty, due to potential payment delays from the
Centers for Medicare & Medicaid Service (CMS) reconciliation
process; however, this is mitigated by implicit capital support
from its ultimate parent. Medco Containment Group’s earnings
remained positive on an annual basis, although they have declined,
driven by increased management fees paid to the parent. Medco
Containment Group has a limited business profile due to its focus
on a single line of business, Medicare Part D, a highly regulated
business in a very competitive market.
The ratings of HealthSpring reflect its balance sheet strength,
which AM Best categorizes as adequate, as well as its adequate
operating performance, neutral business profile and appropriate
ERM. Additionally, the rating upgrades reflect AM Best’s view of
the strategic position HealthSpring plays as a core part of Cigna’s
MA offerings. HealthSpring’s BCAR is considered weak, but the
implicit support of its intermediate holding company, NewQuest,
LLC, and ultimate parent, Cigna, for any capital infusions should
the entities encounter cash-flow uncertainty, supports the balance
sheet assessment. Cigna is committed to growing its MA line of
business and has demonstrated this through reduced dividend
activity and allowing capital to remain in NewQuest, LLC, to
support HealthSpring. Earnings have been favorable and grown in
each of the past two years. The HealthSpring MA products provide
strategic business diversification to Cigna’s commercial group and
specialty products.
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 nonlife license in Europe.
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 Guide to 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 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 New York, London,
Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more
information, visit www.ambest.com.
Copyright © 2020 by A.M. Best Rating
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version on businesswire.com: https://www.businesswire.com/news/home/20200226005581/en/
Joseph Zazzera, MBA Director +1 908 439 2200,
ext. 5797 joseph.zazzera@ambest.com
Stanislav Stoev Financial Analyst +44 20 7626
6264 stanislav.stoev@ambest.com
Sally Rosen Senior Director +1 908 439 2200,
ext. 5280 sally.rosen@ambest.com
Christopher Sharkey Manager, Public Relations
+1 908 439 2200, ext. 5159
christopher.sharkey@ambest.com
Jim Peavy Director, Public Relations +1 908 439
2200, ext. 5644 james.peavy@ambest.com
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