Fitch Ratings Downgrades CIGNA Corporation

Business Wire, Oct 29, 2002

Business Editors

CHICAGO--(BUSINESS WIRE)--Oct. 29, 2002

Fitch Ratings has downgraded and removed from Rating Watch Negative the ratings of CIGNA Corporation and its lead operating subsidiary, Connecticut General Life Insurance Company (CG Life). The rating action affects approximately $1.6 billion of debt outstanding as of June 30, 2002. The Rating Outlook is Stable. A list of all ratings is provided at the end of this release.

The rating action follows CIGNA's recent announcement that operating earnings in its health benefits business will be materially below expectations for the second half of 2002 and 2003. CIGNA also announced that it intends to increase its pension liability associated with its employee pension plan due to the deterioration in the equity markets. Based on current market conditions, CIGNA estimates that the reduction in shareholders' equity to be approximately $600 to $700 million.

The rating action is based on Fitch's view that CIGNA's prospective operating performance and balance sheet fundamentals are inconsistent with the prior rating levels. CIGNA's recent operating performance has been negatively impacted by deterioration in underwriting results in its experience-rated and guaranteed cost indemnity health business and challenges resulting from the implementation of new technology and service platforms. Positively, the operating performance of CIGNA's other health benefit and pension businesses continue to perform in line with Fitch's expectations. CIGNA's ratings historically had been based, in part, on the company's favorable and consistent earnings.

Fitch continues to view CIGNA's balance sheet fundamentals as favorable, albeit somewhat weakened due to the recently announced charges. Fitch expects financial leverage to increase to the 30%-31% range at year-end 2002, and to trend downward within its stated target range of 20%-30%. Based on CIGNA's reduced earnings outlook, Fitch expects earnings based interest coverage in the 10 times (x) range in 2003.

Fitch expects CIGNA's historically strong liquidity profile to be somewhat constrained over the near term. However, Fitch does believe that CIGNA does have sufficient liquidity to fund the cash requirements associated with the reinsurance charges. CIGNA's primary sources of liquidity include significant liquid assets at the holding company, strong operating subsidiary dividend capacity and existing bank credit facilities. The previously announced sale of CIGNA's New Mexico-based health plan is expected to close around year-end 2002, and is expected to generate net cash proceeds of approximately $200 million.

CIGNA's current ratings and Stable Rating Outlook reflects the underlying strength of the company's health benefits, retirement services and investment operations, favorable balance sheet fundamentals, and expected good, though lower, earnings performance. CIGNA maintains a strong competitive position in the health benefits business, which accounts for the majority of CIGNA's revenues and earnings.

   Entity/Issue/Type/Action/Rating/Outlook

  CIGNA Corporation
--Long-term rating            Downgraded to 'A-' from 'A'/Stable;

--Senior debt rating          Downgraded to 'A-' from 'A'/Stable;

--Subordinated debt rating    Downgraded to 'BBB ' from 'A-'/Stable;

--Commercial paper rating     Downgraded to 'F2' from 'F1'.

  Connecticut General Life Insurance Company
--Insurer financial strength  Downgraded to 'AA-' from 'AA'/Stable.