AM Best Assigns Issue Credit Ratings to The Cigna Group’s New Senior Unsecured Notes

Rhea-AI Summary

AM Best has assigned a Long-Term Issue Credit Rating of “bbb” to $700 million and $800 million senior unsecured notes issued by Cigna, with positive outlook. Cigna plans to utilize proceeds for debt repayments and general corporate purposes, facing nearly $3 billion in debt maturities in 2023. Financial leverage is reported at 40.9%, expected to stabilize post-debt issuance. Cigna's earnings before interest and taxes improved to 8.2 times in 2022, with a 13% increase in healthcare earnings. The company's liquidity remains robust with $5.5 billion from the divestiture of its Asia-Pacific operations.

Positive

• Assigned 'bbb' credit rating with positive outlook from AM Best.
• Proceeds from the issuance will pay down upcoming debt maturities and bolster liquidity.
• Earnings before interest and taxes coverage improved to over 8.2 times in 2022.
• Healthcare earnings grew by 13% in 2022 amid lower COVID-19 claims.

Negative

• Dividends from insurance entities declined from $2.8 billion in 2021 to $1.9 billion in 2022.
• High goodwill and intangible assets remain at approximately 100% of shareholders' equity.

OLDWICK, N.J.--(BUSINESS WIRE)-- AM Best has assigned a Long-Term Issue Credit Rating of “bbb” (Good) to the $700 million, 5.685% senior unsecured notes due March 15, 2026, and the $800 million, 5.4% senior unsecured notes due March 15, 2033, recently issued by The Cigna Group (Cigna) (headquartered in Bloomfield, CT) [NYSE:CI]. The outlook assigned to these Credit Ratings (ratings) is positive. The existing ratings of Cigna and its subsidiaries are unchanged.

The proceeds from the issuance will be used to pay down upcoming debt maturities and for general corporate purposes. Cigna has close to $3 billion of senior unsecured notes coming due throughout 2023. Cigna’s financial leverage was 40.9% at year-end 2022, which is in line with its peers. Financial leverage has moderated substantially over the past several years following the $67 billion acquisition of Express Scripts in late 2018. Financial leverage is expected to increase slightly after the new debt issuance but will return to the 40% range as maturities are paid. Cigna’s earnings before interest and taxes interest coverage improved in 2022 to over 8.2 times compared with 6.5 times in 2021 due to stronger earnings. Cigna’s earnings from health care operations grew 13% in 2022 compared with 2021 as medical cost ratio posted a 230 basis points improvement mainly driven by lower COVID-19 claims and pricing initiatives. Non-regulated earnings at the Evernorth segment improved by 5% supported by revenue growth. The Evernorth segment comprised about 75% of revenues, and 53% of earnings from operations for the enterprise-reducing pressure for dividends form the insurance subsidiaries. The dividends from Cigna insurance entities declined to $1.9 billon in 2022 from $2.8 billion and $2.3 billion in 2021 and 2020, respectively.

In addition to operating earnings, Cigna’s financial position was enhanced through $5.5 billion of proceeds from divestiture of its Asia-Pacific insurance operations completed in mid-2022. The proceeds from the sale were used primarily for share repurchase. Cigna repurchased $7.6 billion worth of shares in 2022, slightly lower compared with 2021. Furthermore, Cigna paid a cash dividend of $1.4 billion in 2022 and announced a 10% increase in dividend for 2023.

Cigna maintains good liquidity and financial flexibility through parent company cash, a commercial paper program and several credit facilities, as well as the ability to borrow up to $3 billion from the insurance subsidiaries without additional authorizations. There was no commercial paper outstanding or any borrowing against credit facilities at year-end 2022.

Goodwill and intangibles assets remain high at approximately 100% of shareholders equity. However, the ratio declined from over 150% in 2018 when the purchase of Express Scripts was completed. In addition, high goodwill/intangibles is tied primarily to non-insurance operations, which continue to produce stable earnings and provide a substantial degree of diversification.

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.

Copyright © 2023 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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Joseph Zazzera

Director

+1 908 439 2200, ext. 5797

joseph.zazzera@ambest.com

Christopher Sharkey

Manager, Public Relations

+1 908 439 2200, ext. 5159

christopher.sharkey@ambest.com

Doniella Pliss

Director

+1 908 439 2200, ext. 5104

doniella.pliss@ambest.com

Al Slavin

Senior Public Relations Specialist

+1 908 439 2200, ext. 5098

al.slavin@ambest.com

Source: AM Best

FAQ

What is the recent credit rating assigned to Cigna by AM Best?

AM Best has assigned a Long-Term Issue Credit Rating of 'bbb' to Cigna.

What will Cigna use the proceeds from the senior unsecured notes for?

Cigna will use the proceeds to pay down upcoming debt maturities and for general corporate purposes.

What financial metrics did Cigna report for 2022?

Cigna reported a financial leverage of 40.9% and earnings before interest and taxes coverage improved to over 8.2 times.

How much did Cigna's healthcare earnings grow in 2022?

Cigna's healthcare earnings grew by 13% in 2022 compared to 2021.

What changes occurred in Cigna's dividends from 2021 to 2022?

Dividends from Cigna's insurance entities declined from $2.8 billion in 2021 to $1.9 billion in 2022.