MOODY'S CONFIRMS CREDIT RATINGS OF CIGNA CORPORATION AND SUBSIDIARIES (SENIOR AT A3) FOLLOWING ANNOUNCEMENT TO SELL INDIVIDUAL LIFE INSURANCE BUSINESS
New York, 07-29-97 -- Moody's Investors Service confirmed the credit ratings of CIGNA Corporation (senior debt rating at A3) and its subsidiaries following the announcement that CIGNA has signed a definitive agreement to sell its individual life, life brokerage and annuity business to Lincoln National Corporation for approximately $1.4 billion. The transaction is subject to regulatory approvals and is expected to close by year-end 1997.
According to Moody's, the confirmation of CIGNA's ratings is based primarily on the modest effects the sale will have on the prospective earnings and capital structure of CIGNA and its wholly owned life insurance subsidiary, Connecticut General Life Insurance Company (CG Life). Moody's understands that the sale of the individual life insurance operations will free-up as much as $1.3 billion of capital at CG Life, nearly all of which is anticipated to be distributed to CIGNA and used for internal growth, acquisitions or the repurchase of the company's common stock.
The sale of the individual life insurance operations makes sound strategic sense for CIGNA and CG Life because of the attractive price for the business and because it is not a critical part of CIGNA's institutional market focus, the rating agency said. Moody's believes that the after tax proceeds from the sale will somewhat enhance CIGNA's financial flexibility, but believes the ultimate benefits of the capital redeployment remain uncertain.
Separately, Moody's stated that CIGNA completed its acquisition of Healthsource, Inc. in June 1997. The acquisition is anticipated to provide CIGNA with an expanded market presence and complementary skills in developing provider relationships and marketing healthcare products at a retail level. Moody's noted, however, that it continues to maintain a negative outlook for the ratings of CIGNA and CG Life because of the possibility for additional growth through acquisition over the medium term, and the rising level of competition in the health benefits marketplace. Moody's will continue to monitor CIGNA's success of improving Healthsource's operating margins and the benefits of integration.
The following ratings were confirmed:
CIGNA Corporation -- senior debt rating at A3; provisional senior debt shelf rating at (P)A3; provisional subordinated debt shelf rating at (P)Baa1; provisional cumulative preferred stock shelf rating at (P)"baa1"; provisional non-cumulative preferred stock shelf rating at (P)"baa2"; and rating of the company for commercial paper at Prime-2.
Connecticut General Life Insurance Company -- insurance financial strength rating at Aa3.
Insurance financial strength ratings were confirmed at Baa1 for the following members of the active property/casualty insurance group:
Insurance Company of North America;
CIGNA Property and Casualty Insurance Company;
Pacific Employers Insurance Company;
CIGNA Insurance Company;
Bankers Standard Insurance Company;
Bankers Standard Fire & Marine Insurance Company;
CIGNA Indemnity Insurance Company;
CIGNA Employers Insurance Company;
CIGNA Fire Underwriters Insurance Company;
Atlantic Employers Insurance Company;
CIGNA Insurance Company of Illinois;
CIGNA Insurance Company of Ohio;
CIGNA Insurance Company of Texas;
CIGNA Insurance Company of the Midwest; and
Allied Insurance Company.
Insurance financial strength ratings were confirmed at Ba1 for the following members of the inactive Brandywine group:
Century Indemnity Company, and
CIGNA Reinsurance Company.
The rating outlooks for the active and inactive property and casualty operations are stable, whereas the rating outlooks for CIGNA and Connecticut General are negative.
The following rating of Healthsource, Inc. remains on review for possible upgrade pending CIGNA's tender offer for Healthsource's Inc. debt:
Convertible subordinated notes at B1.
CIGNA Corporation, based in Philadelphia, is a leading provider of health care, insurance, and financial services in the United States, and it is also one of the largest U.S.-based international insurance organizations. CIGNA reported consolidated assets of approximately $99 billion and shareholders' equity of approximately $7.2 billion as of December 31, 1996.
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