A.M. Best Affirms Ratings of Cigna Corporation and Its Subsidiaries

  A.M. Best Affirms Ratings of Cigna Corporation and Its Subsidiaries

Business Wire

OLDWICK, N.J. -- February 14, 2013

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In addition, A.M. Best has withdrawn the FSR of A (Excellent) and ICR of “a”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
www.ambest.com/ratings/methodology.

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

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

Contact:

A.M. Best Co.
Doniella Pliss, 908-439-2200, ext. 5104
Senior Financial Analyst
doniella.pliss@ambest.com
or
Sally Rosen, 908-439-2200, ext. 5280
Assistant Vice President
sally.rosen@ambest.com
or
Rachelle Morrow, 908-439-2200, ext. 5378
Senior Manager, Public Relations
rachelle.morrow@ambest.com
or
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
james.peavy@ambest.com
 
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