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Fitch Affirms CIGNA's Ratings
NEW YORK-(Business Wire)-September 4, 2008 - Fitch Ratings has affirmed its current ratings on CIGNA Corporation (NYSE: CI) (CIGNA). A full rating list is shown below. The Rating Outlook is Stable.
Today's rating action reflects the company's well-established competitive position in the U.S. health benefits and group insurance business, adequate profitability and good operating company balance sheet quality. The company's business mix, including group benefits and international operations, differentiate the company relative to other health and managed care peers by providing diversity to its earnings base.
CIGNA maintains a low exposure to underwriting risk given its high concentration in fee-based and experienced-rated accounts. The benefits related to lower underwriting risk are offset by lower earnings on a per member basis. Fitch has also considered the company's operating margin, which has been good on an overall level though modestly lower than peers in recent years. Fitch's rating concerns include risks associated with the run-off reinsurance business, which include the exposure to variable annuity guarantee risk and adverse reserve development in the workers' compensation carve-out and personal accident business. Variable annuity run-off has negatively impacted net income results in recent periods.
Fitch's rating expectations include stable or slightly growing medical membership in spite of the difficult, highly competitive market conditions that the sector has experienced in 2008. Given market conditions and product shifts - including the recently acquired stop loss business with Great-West Healthcare - Fitch anticipates the company will witness generally stable operating margins during the remainder of 2008 and overall operating earnings levels are expected to remain relatively stable over the next several quarters.
Balance sheet quality is expected to remain solid, including strong asset quality, adequate reserves levels and good operating company capitalization. Fitch estimates longer-term debt/EBITDA - which has been in the 1.0 times range in recent periods - will increase to approximately 1.4-1.5 times during 2008 and into 2009.
Fitch affirms the following ratings with a Stable Outlook:
CIGNA Corporation
— Long-term Issuer Default Rating (IDR) at 'A-';
— 7% notes due 2011 at 'BBB+';
— 5.375% Notes due 2017 'BBB+'.
— 6.375% notes due 2011 at 'BBB+';
— 6.35% notes due 2018 at 'BBB+'
— 7.65% notes due 2023 at 'BBB+';
— 8.3% notes due 2023 at 'BBB+';
— 7.875% debentures due 2027 at 'BBB+';
— 8.3% step down notes due 2033 at 'BBB+';
— 6.15% notes due 2036 at 'BBB+';
— Short-term IDR at 'F2';
— Commercial paper 'F2'.
Connecticut General Life Insurance Company
— Insurer financial strength (IFS) at 'A+'.
Life Insurance Company of North America
— IFS at 'A+'.
CIGNA Life Insurance Company of New York
— IFS at 'A+'.
CIGNA Worldwide Insurance Company
— IFS at 'A+'.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 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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