U.S. health insurer
), has been rated by A.M. Best Co. As a result of its rating
action the agency has affirmed the issuer credit rating (ICR) of
"bbb" and debt ratings of Cigna.
The rating agency has also reviewed the operations of Cigna's
major subsidiaries, as a result of which A. M. Best reiterated
financial strength rating (FSR) of "A" and ICR of "a" for the
company's major life, health, medical health maintenance
organizations (HMO) and dental HMO subsidiaries.
The rating agency acknowledges Cigna's superior operating
performance along with a diversified business profile.The company
has made a foray in the business of serving the senior
population, a much sought-after line of business, with the
acquisition of HealthSpring.
Cigna also remains ahead of the other players
UnitedHealth Group Inc.
), in the same industry in terms of expanding international
operations. Cigna has an active presence in Asian markets
and is continuing its efforts to further penetrate other
The rating agency also views favorably Cigna's recent
reinsurance transaction entered with
Berkshire Hathaway, Inc.
). The transaction has helped to unburden Cigna's significant
liabilities and will enable it to focus on more important aspects
of its business.
Despite the strengths the rating agency is concerned with
dwindling margins in the company's health care and disability
line of business. The decline is due to higher share of Medicare
Advantage business, which is less profitable than commercial
Cigna also carries a high degree of financial leverage
witnessed by a ratio of 34%. Such high level of debt in the
capital structure might weaken the capital ratio.
The rating agency also conferred an FSR of A- and ICRs of "a-"
to HealthSpring, recently acquired by Cigna. The rating agency
has taken into consideration, the fact that the company has been
witnessing a membership growth and that it holds a prominent
place in Medicare Advantage line of business. It also
acknowledges HealthSpring's contribution to Cigna in providing
access to the Medicare Advantage business and towards
collaborative care provider relationship experience.
Further positive rating actions may come from factors such as
stability of earnings, enhanced risk-adjusted capital at the
operating subsidiaries and a decline in financial leverage.
However, a negative rating action may not be ruled out in case of
decline in interest coverage; a decrease in risk-adjusted
capital at Cigna's lead operating entity and significant
weakening of operating performance; or material impairments
within the investment portfolio.
AETNA INC-NEW (AET): Free Stock Analysis
BERKSHIRE HTH-A (BRK.A): Free Stock Analysis
BERKSHIRE HTH-B (BRK.B): Free Stock Analysis
CIGNA CORP (CI): Free Stock Analysis Report
UNITEDHEALTH GP (UNH): Free Stock Analysis
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