A.M. Best Comments on CIGNA Corporation's Pending Acquisition of Great-West Life and Annuity's Healthcare Division

Business Wire, Nov 28, 2007

OLDWICK, N.J. -- A.M. Best Co. has commented that the financial strength ratings and issuer credit ratings of CIGNA Corporation (CIGNA) (Philadelphia, PA) [NYSE: CI] will remain unchanged following the announcement that the company has signed a definitive agreement to acquire Great-West Healthcare, the healthcare division of Great-West Life and Annuity Insurance Company (GWL&A) (Greenwood, CO). GWL&A is a subsidiary of Great-West Lifeco, Inc. (Great-West) (Winnipeg, CN) [TSX:GWO] for $1.5 billion in an all cash transaction.

The transaction is expected to close during the first half of 2008 after receiving the necessary regulatory approvals and meeting the closing requirements. The acquisition is expected to be financed with cash and debt. CIGNA has stated that it plans on issuing $400-500 million of debt to support the acquisition. CIGNA has also halted its stock repurchase program for the next 12 months. As of September 30, 2007, CIGNA operated with a debt-to-capital ratio of approximately 30% and the additional funding is expected to increase the ratio slightly above 30% in the near term. A.M. Best expects the debt-to-capital level to be below 30% by the end of 2008. Earnings Before Interest and Taxes (EBIT) interest coverage was strong at 13 times at the end of third quarter 2007. A.M. Best expects the EBIT interest coverage to remain in the 10-13 times range and that earnings projections as well as risk-based capital levels at the insurance subsidiaries will remain in line with current rating levels.

The transaction is expected to add 2.2 million lives, which consists of 1.5 million medical members in the employer segment and 660,000 members serviced through various third party administrators (TPA). Over 90% of the acquired business is contracted as commercial Administrative Service Only (ASO) plus stop loss to small and mid-sized employers. The acquisition allows CIGNA to follow through with its strategy to expand into the small to mid-sized employer markets and provide cross-selling opportunities for CIGNA's specialty products.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.