CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has affirmed Cigna Corp's (Cigna) 'BBB+' Issuer Default Rating (IDR) and 'BBB' unsecured senior debt ratings. In addition, the 'A' Insurer Financial Strength (IFS) rating of certain Cigna subsidiaries were also affirmed. The Rating Outlooks are Stable. A complete list of rating actions follows at the end of this release.

Today's affirmations follow the completion of a periodic review by Fitch of Cigna's ratings. The rating actions are independent of the pending U.S. Supreme Court ruling on Patient Protection and Affordable Care Act (PPACA). Fitch continues to believe that near-term rating changes to Cigna's, or other health insurance and managed care companies', ratings are unlikely regardless of the court's decision.

Cigna's ratings reflect its sizeable position and scale in the health insurance and managed care industry. Consistent profitability, well capitalized operating subsidiaries and a diversified offering of products favorably support Cigna's ratings. Balanced against these strengths are high financial leverage and legacy issues tied to Cigna's run-off reinsurance business.

Cigna offers health care products in all 50 states and internationally, but has a smaller market share compared to market leaders. Cigna's nearly 13 million medical members and revenue of $22 billion at year-end 2011 were consistent with Fitch's median guidelines for 'modestly-sized' health care companies.

Cigna's profitability measured by five-year average pre-tax margin and return on capital of 10% and 13.6%, respectively were superior to Fitch's guidelines for the current rating category. The company's profitability is a key component offsetting high financial leverage and risks associated with run-off business segments.

Capitalization at Cigna's operating companies (Connecticut General Life Insurance Company, Life Insurance Company of North America, Cigna Life Insurance Company of New York); measured by NAIC Risk-Based Capital (RBC) and operating leverage, have consistently exceeded Fitch's guidelines for the current rating category. Over the most-recent five-year period, the NAIC RBC ratio averaged 333% of the company action level (CAL) and the ratio between managed care premiums and equity averaged 1.7x. The newly acquired HealthSpring, Inc. (HealthSpring) was historically carried at a lower RBC, and consequently the organization-wide RBC is expected to be modestly below 300% of the CAL in 2012.

During 2011 Cigna issued debt in anticipation of its acquisition of HealthSpring, bringing debt as a percentage of total capital to 38% at year-end 2011. This level of financial leverage is viewed as temporary and Fitch expects Cigna to make meaningful progress toward lower leverage by focusing on capital growth through retained earnings in 2012. The ratio between debt and annualized earnings before interest, tax, depreciation and amortization (EBITDA) is somewhat elevated at 1.8x at March 31, 2012, but remains consistent with Fitch's guidelines for the current rating category.

Cigna's run-off variable annuity reinsurance business adds volatility to results as seen in the $135 million loss from guaranteed minimum income benefits (GMIB) business during 2011. Cigna exited this business in 2000, but the long-term nature of these liabilities makes it an ongoing issue.

The key rating triggers that could result in an upgrade include:

--A change in run-rate debt-to-total capital toward 25%;

--A reduction in run-rate earnings and capital volatility associated with run-off segments or a more fully funded pension.

The key rating triggers that could lead to a downgrade include:

--Failure to make meaningful progress in reducing debt-to-total capital toward Fitch's median guideline of 30% for the current rating category;

--A material increase in either losses from Cigna's run-off business segments or pension funding requirements;

--Deterioration in capitalization, measured by an NAIC RBC ratio below 250% of the CAL;

Fitch affirmed the following rating:

Cigna Corp.

--Issuer default rating at 'BBB+';

--Senior unsecured notes at 'BBB';

--Short-term IDR at 'F2';

--Commercial paper rating at 'F2'.

Cigna Corp. Subsidiaries:

Connecticut General Life Insurance Company

Life Insurance Company of North America

Cigna Life Insurance Company of New York

Cigna Worldwide Insurance Company

--Insurer Financial Strength (IFS) ratings at 'A'.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Insurance Rating Methodology' (Sept. 22, 2011);

--'U.S. Health Insurance and Managed Care Rating Methodology' (March 31, 2011).

Applicable Criteria and Related Research:

Insurance Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=651018

Health Insurance and Managed Care (U.S.) Sector Credit Factors

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=674555

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Fitch Ratings
Primary Analyst
Douglas Pawlowski, CFA, +1-312-368-2054
Senior Director
Fitch, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Mark Rouck CPA, CFA, +1-312-368-2085
Senior Director
or
Committee Chairperson
Jim Auden, CFA, +1-312-368-3146
Managing Director
or
Media Relations
Brian Bertsch, New York, +1-212-908-0549
brian.bertsch@fitchratings.com

Source: Fitch Ratings