AM Best has upgraded most of the Long-Term Issuer Credit Ratings (Long-Term ICRs) to “a+” (Excellent) from “a” (Excellent) and affirmed the Financial Strength Rating (FSR) of A (Excellent) of the key U.S. life/health subsidiaries, health maintenance organizations and Europe-based insurance companies of The Cigna Group (Cigna) (headquartered in Bloomfield, CT) [NYSE: CI]. The outlook of the Long-Term ICRs has been revised to stable from positive while the outlook of the FSR is stable.
Additionally, AM Best has affirmed the FSR of A (Excellent) and the Long-Term ICRs of “a” (Excellent) of Cigna HealthSpring Companies (HealthSpring). The outlook of these Credit Ratings (ratings) is stable. In addition, AM Best has upgraded the Long-Term ICR to “a+” (Excellent) from “a” (Excellent) and affirmed the FSR of A (Excellent) of Medco Containment Insurance Company of New York (Troy, NY) and Medco Containment Life Insurance Company (Warrendale, PA). The outlooks of these ratings are stable.
Concurrently, AM Best has upgraded the Long-Term ICR to “bbb+” (Good) from “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 of Cigna. At the same time, AM Best has upgraded the Long-Term IRs of Cigna Holding Company (headquartered in Bloomfield, CT). The outlook of the Long-Term ICRs and Long-Term IRs has been revised to stable from positive. (Please see link below for a detailed listing of the companies and ratings.) The majority of Cigna’s core U.S. operating 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 Long-Term ICR upgrade for Cigna Life & Health Group reflect its sustained strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), and no weakening of balance sheet metrics at the parent, Cigna. Cigna Life & Health Group’s risk-adjusted capitalization has strengthened and remained at the strongest level over the past few years, supported by favorable earnings, despite sizeable annual dividends from the insurance operations. Additionally, the sale of the group insurance business at year-end 2020 removed long-tail risk from the balance sheet and contributed to the group’s improved BCAR score. The balance sheet strength assessment takes into account the elevated investment risk due to higher exposure to alternative assets, commercial mortgages and below investment grade fixed income compared with peer companies.
The ratings of Cigna Life & Health Group also reflect Cigna’s elevated financial leverage of approximately 40% at year-end 2022 and the high level of goodwill largely relating to the Express Scripts merger. However, the financial leverage has moderated considerably since 2018 and Evernorth non-insurance operations built around Express Scripts have become a major contributor to revenue, cash flows and earnings for the enterprise. In addition, the integration of vertical capabilities into insurance products led to better cost structure and an improved competitive position for Cigna’s insurance offerings.
While the leverage may fluctuate depending on timing of new debt issuances and maturities pay downs, management has repeatedly indicated that it remains committed to managing the financial leverage at approximately 40%. 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 Evernorth segment. Insurance earnings have been supported by market-leading positions in the self-funded and stop-loss segments. Cigna’s insurance operations are less exposed to government programs compared with peers resulting in higher margins, and the organization has demonstrated profitable growth in the commercial segment over the past several years.
The ratings of HealthSpring reflect its balance sheet strength, which AM Best assesses as adequate, as well as its adequate operating performance, neutral business profile and appropriate ERM.
HealthSpring is comprised of Medicare Advantage business, however growth in that segment has been below projections for several years. The organization has focused on margin improvement rather than membership growth in this segment, and earnings strengthened in 2022.
The ratings of Cigna Life Insurance Company of Europe S.A.-N.V. (CLICE) (Belgium) 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. Additionally, the company benefits from rating enhancement from Cigna.
The ratings of CIGNA Global Insurance Company Limited (CGIC) (Guernsey) reflect its balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate ERM. Additionally, the company benefits from rating enhancement from Cigna.
A complete listing of The Cigna Group and its subsidiaries’ FSRs, Long-Term ICRs and Long- and Short-Term IRs also is available.
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.
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