Fitch Ratings Affirms CIGNA; Outlook Stable.

CHICAGO -- Fitch Ratings affirmed the ratings on CIGNA Corporation (CIGNA) and its lead operating subsidiary, Connecticut General Life Insurance Company (CG Life). Fitch has also assigned an 'A' insurer financial strength rating to Life Insurance Company of North America (LINA), a sister company of CG Life. The rating action affects approximately $1.4 billion of debt outstanding as of Dec. 31, 2004. The Rating Outlook is Stable. (A complete list of ratings is shown below.)

Fitch's ratings on CIGNA and its subsidiaries continue to reflect the company's well-established competitive position in the health benefits and group insurance business, its strong International business, sound balance sheet fundamentals, and good, albeit reduced, earnings profile.

CIGNA's sound balance sheet fundamentals reflect the company's reasonable financial leverage (22% at year-end 2004), strong statutory capital levels, and very strong liquidity position supported by approximately $1.5 billion of holding company cash (as of year-end 2004) and subsidiary dividends. The company's approximately $1.4 billion of outstanding debt is well-laddered - $100 million comes due in 2006. While Fitch expects that holding company cash will be reduced in 2005 due primarily to share repurchases, Fitch expects CIGNA to maintain minimum holding company cash levels of $500 million, which represents almost five times annual interest expense.

CIGNA's earnings performance in 2004 has been better than expected due to favorable prior-year reserve development and lower-than-expected medical costs in the health benefits business, and strong results in the group insurance and international businesses.

Fitch's key rating concerns include CIGNA's ability to stabilize its health care operations, which has experienced a significant decline in membership due in part to operational issues associated with the company's conversion to a new technology and service platform, and ongoing exposures in the run-off reinsurance business.

While CIGNA has made progress over the past year improving health care service levels and migrating the in-force business to the new platforms (87% of business on new platform as of Jan. 1, 2005), the company continues to face challenges in stabilizing the book of business and reducing operating expenses in line with the reduction in medical membership. Furthermore, Fitch is concerned about the longer term impact of reduced membership on CIGNA's ability to negotiate competitive provider reimbursement arrangements, although management indicates that its current re-contracting efforts are producing positive results. Medical membership declined by approximately 1.9 million to 9.6 million in 2004, and declined an additional 0.9 million members in January 2005 based on reduced sales and low, but improved, persistency levels.

Fitch's concerns for the reinsurance business, which was placed into run-off several years ago, relate to the company's large exposure to variable annuity death benefit (VADB) risk ($1 billion reserve at year-end 2004) and adverse reserve development in the work comp carve-out and personal accident business. These exposures are very long-tail, and the reserves are sensitive to assumptions that may change. While CIGNA has in place a dynamic hedging program for the VADB exposure that has performed as expected to date, the hedge does not completely eliminate operational, market, and policyholder behavior risks.

Fitch affirms the following with a Stable Outlook:

CIGNA Corporation

-- Long-term rating 'BBB';

-- Senior debt rating 'BBB';

-- Commercial paper rating 'F2'.

Connecticut General Life Insurance Company

-- Insurer financial strength 'A'.

Fitch rates the following with a Stable Outlook:

Life Insurance Company of North America

-- Insurer financial strength is rated 'A'.