S&P Announces: CIGNA Corp. 'BBB' Ratings Affirmed; Outlook Negative; Unit Ratings Kept on Watch Negative

Business Wire, Nov 18, 2003

Business Editors

NEW YORK--(BUSINESS WIRE)--Nov. 18, 2003

On Nov. 18, 2003, Standard & Poor's Ratings Services affirmed its 'BBB' counterparty credit rating on CIGNA Corp. (NYSE:CI) following CI's announced plans to sell its retirement business to Prudential Financial Inc. for $2.1 billion in cash. The outlook is negative.

At the same time, the 'A' counterparty credit and financial strength ratings on Connecticut General Life Insurance Co. (Connecticut General), will remain on CreditWatch negative where they were placed Oct. 6, 2003.

Following the transaction, the ratings on Connecticut General are likely to be lowered to 'A-' with a negative outlook, resulting from the operating company losing diversification of its business position and risk as well as the loss of a significant, stable income stream from the retirement business. Connecticut General would likely remain capitalized at a good level in support of its health and group insurance lines, but below historically very strong capitalization levels.

Although a large portion of the proceeds from the sale of its retirement and investment services business are expected to be used in the repurchase of outstanding shares of CI stock, Standard & Poor's also expects CI to reserve cash at the holding company and repurchase some outstanding debt. The stronger financial flexibility of the holding company post-transaction is offset by weaker financial strength of its core operating company.

Outlook

The negative outlook reflects CI's continued operational challenges in its healthcare segment. Standard & Poor's expects CI's after-tax operating income (before special charges) for 2003 to be $700 million-$750 million. By year-end 2003, medical enrollment will be down 10% from year-end 2002, with a similar membership loss possible in 2004. On a combined basis with the company's health care affiliates, CI's capital adequacy ratio (pro forma excluding the retirement services business) at year-end 2003 is expected to be about 120%. Total debt to capital is expected to remain favorable for the rating at 25%-30%. Interest coverage is expected to be strong at 8x-10x in 2003 and 2004.

Ratings List
CIGNA Corp.
  Counterparty credit rating               BBB/Negative/A-2
  Senior unsecured debt rating             BBB
  Subordinated debt rating                 BBB-
  Commercial Paper                         A-2
Connecticut General Life Insurance Co.
  Counterparty credit rating               A/WatchNeg/--
  Financial strength rating                A/WatchNeg

Complete ratings information is available to subscribers of RatingsDirect, Standard & Poor's Web-based credit analysis system, at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com; under Credit Ratings in the left navigation bar, select Credit Ratings Lists. Standard & Poor's ratings appear alphabetically.