A.M. Best Upgrades Several CIGNA Corp. HMOs; Affirms All Debt and Financial Strength Ratings

Business Wire, Dec 17, 2004

OLDWICK, N.J. -- A.M. Best Co. has upgraded the financial strength ratings of several of CIGNA Corporation's (NYSE: CI) (Philadelphia, PA) HMOs. Additionally, A.M. Best has assigned a financial strength rating of A- (Excellent) to CIGNA HealthCare of Delaware, Inc. (Delaware). A.M. Best has also affirmed all debt and the remaining financial strength ratings. All ratings have a stable outlook. These rating actions affect approximately $1.4 billion of senior debt, the indicative ratings for securities issuable under the shelf registration and 30 rated operating subsidiaries. (See link below.)

CIGNA's refocused underwriting, streamlined administration and revised medical management have improved health care earnings and service levels. This trend is forecasted to continue during the medium term, complementing favorable returns from specialty health services, disability and life and international businesses.

Retirement business sale proceeds mitigate the enterprise's liquidity and financial flexibility issues and provide capital to fund the turnaround. Proceeds have replenished the holding company's cash balance, which will be managed to at least $500 million. HMO risk-based capital is forecasted to expand on average, facilitated by CIGNA's declining membership base and retaining additional capital at each HMO to moderately exceed--rather than match--state-mandated minimums.

However, health care's favorable results are only recent and are subject to execution risk and competitive pressure. These issues could challenge CIGNA's goal to grow membership in 2005 and 2006. Also, any material non-recurring charges for ongoing and discontinued operations could stall the turnaround and pressure all ratings.

Key financial metrics are commensurate with debt and financial strength ratings. Financial leverage should approximate the mid point of the 20 to 30% range, owing to the use of transaction proceeds to actively repurchase common shares and right-size the capital structure. Interest and fixed charge coverage ratio results are forecasted to return to historical norms, approximating 15 and 10 times, respectively. Intangible assets still comprise a manageable portion of the balance sheet, lending further strength to the quality of CIGNA's capital structure.

For a complete list of CIGNA Corporation's financial strength and debt ratings for, please visit http://www.ambest.com/press/121703cigna.pdf.> For a list of A.M. Best's debt ratings, please visit http://www.ambest.com/debt.> For current Best's Ratings, independent data and analysis on more than 1,050 health companies and more than 130 HMO industry composites, please visit http://www.ambest.com/health/.> A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at http://www.ambest.com.