MOODY'S CONFIRMS INSURANCE FINANCIAL STRENGTH RATINGS OF MEMBERS OF CIGNA'S ACTIVE PROPERTY/CASUALTY INSURANCE GROUP AT Baa1 -- RATING OUTLOOK IS POSITIVE; LOWERS INSURANCE FINANCIAL STRENGTH RATINGS OF TWO MEMBERS OF INACTIVE BRANDYWINE PROPERTY/CASUALT
New York, 02-23-96 -- Moody's confirmed its Insurance Financial Strength ratings of 15 members of CIGNA's active property/casualty insurance group at Baa1, and lowered the Financial Strength ratings of two members of the new inactive property/casualty insurance group to Ba1, from Baa1. These rating actions follow CIGNA's execution of its P&C restructuring plan on February 12, 1996.
According to Moody's, the rating confirmations of the active companies' ratings reflect the distancing of CIGNA's continuing operations from those of the inactive companies, in particular, the former's contingent liability for claim costs associated with exposures to environmental and toxic tort liability claims, as well as the resulting potential for improved business prospects at the active operations. Under the new structure, the active group has provided the inactive companies with an $800 million excess-of-loss reinsurance cover for potential reserve shortfalls, part of which is available to cover direct A&E exposures of members of the active property/casualty group. Tempering these favorable factors are the domestic property/casualty group's weak core earnings. Moody's noted its outlook for the active companies' ratings is positive, and reflects the agency's expectation that earnings at the continuing P&C operations should improve over the near term. The agency cautioned, however, that the adequacy of claim reserves on both discontinued and continuing business will remain a factor in evaluating the quality of earnings reported by CIGNA over the intermediate term. Moody's further noted that challenges filed by certain state insurance regulators and policyholders to CIGNA's restructuring contribute an element of uncertainty to the ultimate success of the restructuring.
With regard to the two rated subsidiaries that are now part of the inactive Brandywine property/casualty group, Moody's noted that although recent estimates of CIGNA's reserves for its discontinued operations have gained credibility as a result of increased claim-handling experience, it could be several years before a clearer picture emerges as to the adequacy of current provisions. Despite the recent strengthening of reserves for environmental, asbestos, and uncollectable reinsurance, the limited recourse of the inactive companies to CIGNA's continuing operations, and uncertainties regarding CIGNA Corporation's long-term commitment to the property/casualty insurance business, increase the risk profile for claimants of the Brandywine companies.
Moody's also said that it has a positive outlook for CIGNA Corporation's long-term debt ratings, reflecting the increased isolation of exposures to A&E liability claims at the discontinued operations, which may reduce the contingent funding burden on CIGNA Corporation and on its ongoing subsidiary operations. This burden has been a constraint on the debt ratings of the parent company, as well as on the Insurance Financial Strength rating of CIGNA's principal life insurance subsidiary, Connecticut General Life Insurance Company, whose rating outlook is also positive.
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, Allied Insurance Company.
Insurance Financial Strength ratings were lowered to Ba1, from Baa1, for the following members of the inactive Brandywine group: Century Indemnity Company, CIGNA Reinsurance Company.
CIGNA Corporation is a multiline insurance holding company, based in Philadelphia, Pennsylvania. It reported assets of $95.9 billion as of December 31, 1995.
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