Fitch Downgrades CIGNA to 'BBB+', Affecting $1.5B of Debt.

Business Editors

CHICAGO--(BUSINESS WIRE)--July 14, 2003

Fitch Ratings has downgraded the ratings of CIGNA Corporation and its lead operating subsidiary, Connecticut General Life Insurance Company (CG Life). The ratings are listed below. The rating action affects approximately $1.5 billion of debt outstanding as of March 31, 2003. The Rating Outlook is Negative.

The rating action follows CIGNA's announcement that earnings for the second half of 2003 will be negatively impacted by higher-than-expected medical costs, lower-than-expected medical membership and increased reserving associated with the company's run-off reinsurance business. In CIGNA's health care operations, management has reduced earnings expectations by approximately $175 million. In the run-off reinsurance business, CIGNA expects to report a $300 million after-tax charge in the third quarter of 2003 due to reserve strengthening associated with the company's exposure to variable annuity death benefits (VADB).

The rating action reflects Fitch's concerns regarding the continued underperformance of CIGNA's health care operations and ongoing concerns regarding the company's exposure to variable annuity death benefit risk. CIGNA's health care operations have been negatively impacted by challenges resulting from the implementation of new technology and service platforms and deterioration in underwriting controls and medical cost management. Based on the company's reduced guidance, CIGNA's health care business is now expected to generate after-tax operating margins in the 3.0% range in 2003 compared with Fitch's previous expectation of approximately 4.0%. Furthermore, Fitch expects medical membership to decline in 2003 from 13.0 million at yearend 2002 to approximately 11.7 million at yearend 2003. In the reinsurance business, the additional VADB reserves were driven by higher-than-expected policyholder persistency. Fitch continues to expect further strong earnings performance in CIGNA's other health benefit and pension businesses.

Fitch continues to view CIGNA's balance sheet fundamentals as good. Fitch expects financial leverage to trend down from 33% at year-end 2002 to approximately 29% at yearend 2003. The statutory capitalization of CIGNA's regulated subsidiaries, including CG Life, continue to be good and were unaffected by the additional VADB reserving, which was a GAAP-only charge. Based on CIGNA's reduced earnings outlook, Fitch expects EBITDA-based interest coverage in the 5 times range in 2003 (8 times excluding the VADB charge).

Fitch expects CIGNA's historically strong liquidity profile to be constrained over the near term. Cash balances at the holding company were significantly reduced in 2002 due to subsidiary funding needs resulting from the reinsurance charges. CIGNA's primary sources of liquidity include subsidiary dividends and existing bank credit facilities.

Entity/Issue/Type/Action/Rating/Outlook

CIGNA Corporation

-- Long-term rating Downgraded to 'BBB+' from 'A-'/Negative;

-- Senior debt rating Downgraded to 'BBB+' from 'A-'/Negative;

-- Subordinated debt rating Downgraded to 'BBB' from

'BBB+/Negative;

-- Commercial paper rating Affirmed 'F2'.

Connecticut General Life Insurance Company

-- Insurer financial strength Downgraded to 'A+' from

'AA-'/Negative.