AM Best Affirms Credit Ratings of The Cigna Group and Its Subsidiaries

AM Best has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICRs) of “a+” (Excellent) of the key U.S. life/health subsidiaries and Europe-based insurance companies of The Cigna Group (Cigna) (headquartered in Bloomfield, CT) [NYSE: CI]. In addition, AM Best has affirmed the Long-Term ICR of “bbb+” (Good) and the Long-Term Issue Credit Ratings (Long-Term IRs) of Cigna. AM Best also has affirmed the Short-Term Issue Credit Rating (Short-Term IR) of Cigna. The outlook of these Credit Ratings (ratings) is stable. (Please see below for a detailed listing of the companies and ratings.) The majority of Cigna’s core U.S. health insurance entities are collectively referred to as 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 rating affirmations reflect Cigna Life & Health Group’s sustained strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), and no weakening of balance sheet metrics. Cigna Life & Health Group’s risk-adjusted capitalization has remained at the strongest level, driven by capital expansion supported by favorable earnings, despite sizeable annual dividends from the insurance operations to the parent organization. Furthermore, the sale of certain insurance businesses over the past several years removed long-tail risk from the balance sheet, improving the group’s BCAR score. Investment risk is on the low side as the vast majority of assets are held in investment grade fixed income securities and cash/short-term investments with no material exposure to equities, real estate or schedule BA assets. The conservative asset allocation drives strong liquidity measures along with favorable operating cash flows.

Cigna Life & Health Group’s balance sheet strength assessment continues to be impacted by elevated financial leverage of over 43% and the very high level of goodwill at Cigna, the ultimate parent, largely relating to the Express Scripts merger, several years ago. However, management is expected to deleverage and remains committed to managing the financial leverage at the targeted level of approximately 40%. Goodwill and intangibles assets remain high at over 160% of shareholders’ equity at Cigna. However, the high goodwill/intangibles are mostly tied primarily to non-insurance operations, which continue to produce stable earnings and provide a substantial degree of diversification.

Cigna has excellent liquidity through parent company cash, insurance subsidiary dividend capacity, non-regulated cash flow, commercial paper program and a revolving credit agreement.

Furthermore, a steady stream of revenue development and earnings growth has resulted in a solid operating performance trend over the last several years, underpinned by the group’s operations at Cigna Healthcare and Evernorth Health Services. The organization expects this growth to continue over the medium term. Cigna’s debt service is supported by its strong earnings and dividends from the group’s insurance entities, as well as solid non-regulated earnings from its Health Services/Evernorth segment. Additionally, proceeds from the sale of Cigna’s Medicare Advantage businesses are expected to help bolster holding company metrics.

Cigna’s operating performance is assessed as strong with a consistent trend of premium growth and overall profitability. Over the past year, all business lines reported an increase in premiums despite membership loss in the individual family plan segment. Net earnings are mostly driven by favorable underwriting results. The group’s investment income remains positive and has shown growth but contributes modestly to overall net earnings. In addition, Cigna’s operating earnings benefit from its large scale with a membership base of over 19 million individuals on a consolidated basis, providing cost advantages for medical expenditures and administrative expenses. Furthermore, AM Best expects the group’s operating performance to remain favorable with possible improvement from the sale of its Medicare business, which had been a drag on earnings.

The group continues to maintain a strong market presence in its core commercial medical products in the United States. In addition, Cigna Life & Health Group portfolio includes owned and affiliated companies that provide the organization with added diversified capabilities. Through its noninsurance service entities, Cigna provides pharmacy benefit management services, as well as a comprehensive suite of solutions for complex and chronic conditions to drive down the cost of care. Furthermore, Cigna has expanded its customer base through cross-selling opportunities via Evernorth health services arm, with further opportunity for premium, revenue and earnings growth for the overall organization.

The ratings of CIGNA Life Insurance Company of Europe S.A.-N.V. 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 of CIGNA Global Insurance Company Limited 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 FSR of A (Excellent) and the Long-Term ICRs of “a+” (Excellent) have been affirmed with stable outlooks for the following key U.S. life/health subsidiaries of The Cigna Group:

• Connecticut General Life Insurance Company
• Cigna Health and Life Insurance Company
• Cigna Worldwide Insurance Company
• Cigna HealthCare of Indiana, Inc.
• Cigna HealthCare of North Carolina, Inc.
• Cigna HealthCare of South Carolina, Inc.
• Cigna HealthCare of Arizona, Inc.
• Cigna HealthCare of Georgia, Inc.
• Cigna HealthCare of Texas, Inc.
• Cigna HealthCare of Florida, Inc.
• Cigna HealthCare of New Jersey, Inc.
• Cigna HealthCare of Connecticut, Inc.
• Cigna HealthCare of Illinois, Inc.
• Cigna HealthCare of St. Louis, Inc.
• Cigna HealthCare of Tennessee, Inc.
• Cigna HealthCare of California, Inc.
• Cigna Dental Health Plan of Arizona, Inc.
• Cigna Dental Health of California, Inc.
• Cigna Dental Health of Florida, Inc.
• Cigna Dental Health of Maryland, Inc.
• Cigna Dental Health of Ohio, Inc.
• Cigna Dental Health of Pennsylvania, Inc.
• Cigna Dental Health of Texas, Inc.
• Cigna Dental Health of New Jersey, Inc.
• Cigna Dental Health of Missouri, Inc.
• Cigna Dental Health of Virginia, Inc.

The FSR of A (Excellent) and the Long-Term ICRs of “a+” (Excellent) have been affirmed with stable outlooks for the following Europe-based subsidiaries of The Cigna Group:

• CIGNA Life Insurance Company of Europe S.A. – N.V.
• CIGNA Europe Insurance Company S.A. – N.V.
• CIGNA Global Insurance Company Limited

The following Long-Term IRs have been affirmed with stable outlooks for The Cigna Group:

The Cigna Group—

-- “bbb+” (Good) on $800 million of 1.25% senior unsecured notes, due 2026

-- “bbb+” (Good) on $1 billion of 5% senior unsecured notes, due 2029

-- “bbb+” (Good) on $1.5 billion of 2.4% senior unsecured notes, due 2030

-- “bbb+” (Good) on $1.5 billion of 2.375% senior unsecured notes, due 2031

-- “bbb+” (Good) on $750 million of 5.125% senior unsecured notes, due 2031

-- “bbb+” (Good) on $800 million of 5.4% senior unsecured notes, due 2033

-- “bbb+” (Good) on $1.25 billion of 5.25% senior unsecured notes, due 2034

-- “bbb+” (Good) on $750 million of 3.2% senior unsecured notes, due 2040

-- “bbb+” (Good) on $1.25 billion of 3.4% senior unsecured notes, due 2050

-- “bbb+” (Good) on $1.5 billion of 3.4% senior unsecured notes, due 2051

-- “bbb+” (Good) on $1.5 billion of 5.6% senior unsecured notes, due 2054

The following Short-Term IR has been affirmed:

The Cigna Group—

-- AMB-2 (Satisfactory) on commercial paper program

The following indicative Long-Term IRs have been affirmed with stable outlooks for The Cigna Group:

The Cigna Group—

-- “bbb+” (Good) on senior unsecured debt

-- “bbb-” (Good) on preferred stock

The following Long-Term IRs have been affirmed with stable outlooks for Cigna Holding Company:

Cigna Holding Company—

-- “bbb+” (Good) on $900 million of 3.25% senior unsecured notes, due 2025

-- “bbb+” (Good) on $300 million of 7.875% of senior unsecured debentures, due 2027

-- “bbb+” (Good) on $600 million of 3.05% senior unsecured notes, due 2027

-- “bbb+” (Good) on $83 million of 8.3% senior unsecured step-down notes, due 2033

-- “bbb+” (Good) on $500 million of 6.15% senior unsecured notes, due 2036

-- “bbb+” (Good) on $300 million of 5.875% senior unsecured notes, due 2041

-- “bbb+” (Good) on $750 million of 5.375% senior unsecured notes, due 2042

-- “bbb+” (Good) on $1 billion of 3.875% senior unsecured notes, due 2047

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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