CIGNA
Fitch Ratings has affirmed the Insurer Financial Strength (IFS) ratings of
The Rating Outlook is Stable.
Key Rating Drivers
The affirmation of the ratings follows Cigna's announcement that it has entered a material definitive agreement with
The elevated financial leverage of the company is above guidelines for standard notching under Fitch's Insurance Rating Criteria, resulting in widened notching between the IDR of Cigna's operating companies and the IDR of the holding company. Cigna's debt ratings benefit from the enhanced flexibility provided by sizable, nonregulated cash flows generated by Cigna's Evernorth segment. Specifically, the holding company's ratings benefit from a default recovery assumption of average versus below average under Fitch's criteria due to Evernorth's sizable unregulated and segregated cash flows. This results in Cigna's senior unsecured debt rating being equivalent to the holding company's IDR.
Fitch affirmed the ratings of Cigna on
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
Sustained operating EBITDA margin of 8.5% or higher;
Sustained debt/EBITDA ratio and financial leverage ratio of 1.8x and 38% or lower, respectively;
Sustained RBC above 275%;
Holding company ratings could be upgraded if debt/EBITDA is sustained at 2.3x or lower and financial leverage ratio sustained below 40%.
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
Sustained RBC ratios below 235%;
Sustained EBITDA margin below 6.0%;
GAAP return on capital metric below 7.5%;
Sustained debt/EBITDA ratio above 3.0x and a financial leverage above 45%;
Cigna's unsecured senior debt ratings could be downgraded if the Evernorth segment's operating EBITDA relative to consolidated interest expense is less than approximately 4x or less than 30% of consolidated pretax operating income, or if it becomes encumbered by direct ownership of a regulated subsidiary.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.
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