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 New Zealand- and Europe-based insurance companies of Cigna Corporation (Cigna) (headquartered in Bloomfield, CT) [NYSE: CI]. Concurrently, AM Best has affirmed the FSR of A (Excellent) and the Long-Term ICRs of “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 affirmed the FSR of A (Excellent) and the Long-Term ICRs of “a” of the Cigna HealthSpring Companies (HealthSpring). AM Best also has affirmed the Long-Term ICR of “bbb”, the Long-Term Issue Credit Ratings (Long-Term IR) 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 affirmed the Long-Term IRs of Cigna Holding Company (headquartered in Bloomfield, CT). 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 core U.S. operating entities are collectively referred to herein by AM Best as the Cigna Life & Health Group. The ratings of Cigna Life & Health Group reflect its balance sheet strength, which AM Best assesses 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 factor in the elevated, albeit declining, financial leverage of just below 40% through year-end 2020, and the very high level of goodwill at Cigna, the ultimate parent. AM Best notes that the Cigna organization has successfully executed the integration of Express Scripts following the merger, including the moderation of its total leverage. While the March 2021 debt issue has caused leverage to increase in the interim, a large portion of the funds are being used to redeem and replace existing debt. Furthermore management has repeatedly indicated that it remains committed to continued de-leveraging, which is expected to leave financial leverage around 40% again by the end of 2021. Cigna has strong earnings and dividends from the group’s insurance entities, as well as solid non-regulated earnings from its Evernorth segment and from additional one-time special items, such as a portion of the proceeds from the sale of its group employee benefits business at year-end 2020. These have helped bolster holding company metrics, such as interest coverage and reduction of outstanding debt.
Cigna Life & Health Group’s balance sheet strength assessment of strong is supported by its risk-adjusted capitalization, which is at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), reinforced by excellent sources of contingent liquidity with strong and stable metrics, and operating cash flows across its diverse set of businesses. Additionally, Cigna provides access to cash in the event there are any cash flow or capital needs, and Cigna’s insurance subsidiaries have consistently provided cash flow upstream in the form of dividends, which have been growing each of the past two-years, given favorable operating results.
Cigna Life & Health Group reported strong earnings again in 2020, supported by lower utilization in the face of the COVID-19 pandemic, with the organization also consistently reporting strong double-digit profitability ratios. Earnings and margins have been driven by Cigna Life & Health Group’s core commercial and its senior segment–Medicare-related operations. AM Best also notes that Cigna Life & Health Group operates a lower risk model, with a majority of its commercial business in self-funded/administrative services only (ASO) employer groups. It should be noted that the sale of its group insurance operations is expected to cause a decline in total aggregate premium volume. Additionally, new sales were somewhat depressed in 2020, due to the pandemic, but this was offset by better persistency with less groups shopping coverage. Cigna has generally reported premium growth in its core businesses, and growth is projected for 2021.
AM Best views Cigna Life & Health Group’s business profile as favorable, driven by the combination of strong market presence in its core products in the United States. 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. Cigna has taken a measured approach to the Medicaid space, with a focus on the dual-eligible population. Finally, Express Scripts and growth of its Evernorth health services business, as well as the parent’s international business, provide Cigna an expanded customer base and cross-selling opportunities, with further opportunity for premium, revenue and earnings growth for the overall organization.
The ratings of Medco Containment Group reflect its balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate ERM. AM Best’s views Medco as a strategic and core part of Cigna’s Medicare Part D offerings.
The ratings of HealthSpring reflect its balance sheet strength, which AM Best assesses as adequate, as well as its adequate operating performance, neutral business profile and appropriate ERM. Additionally, the ratings reflect AM Best’s view of the strategic position HealthSpring plays as a core part of Cigna’s MA offerings.
The ratings of Cigna Life Insurance Company of Europe S.A.-N.V. (CLICE) (Belgium) reflect its balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate ERM. The ratings also factor in rating enhancement from Cigna. The ratings of CIGNA Europe Insurance Company S.A.-N.V. (CEIC) factors in its strategic importance to CLICE and Cigna as the group’s non-life insurance carrier in Europe. With its competitive position in Europe’s health insurance market, CLICE is viewed as a key component to the group’s strategy to access and develop local opportunities in a drive to provide further geographical diversification and to strengthen global presence.
The ratings of Cigna Life Insurance New Zealand Limited (CLINZ) (New Zealand) reflect its balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate ERM. Furthermore, the ratings of CLINZ factor in rating enhancement from the Cigna group. This reflects integration and ownership from Cigna group and AM Best’s expectation that the group would provide capital support if required. CLINZ ranks among the largest life insurance companies in New Zealand, benefiting from a multichannel distribution approach. While the company accounts for a small component of the Cigna group’s consolidated revenues and earnings, it is viewed as significant to the group’s operations in the Asia-Pacific region.
A complete listing of Cigna Corporation and its subsidiaries’ FSRs, Long-Term ICRs and Long- and Short-Term IRs also is available.
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