CIGNA CORPORATION SENIOR DEBT RATING LOWERED TO 'A+'
CHICAGO, March 3 /PRNewswire/ -- Duff Phelps Credit Rating Co. has lowered the senior debt rating of the CIGNA Corporation from AA-' (Double-A-Minus) to A+' (Single-A-Plus), and the subordinated debt rating from A+' (Single-A-Plus) to A' (Single-A). These rating changes reflect the deterioration in the operations of CIGNA's property and casualty business segment. Poor profitability and adverse loss reserve development in the property and casualty business segment have significantly impacted overall corporate earnings and have resulted in the operating leverage of the property and casualty group increasing beyond prudent levels given its business mix. Historical adverse loss development and profitability pressures in this segment are anticipated to continue and the continued weakness of the property and casualty segment will produce additional pressure on earnings and debt coverage. The total amount of debt impacted by these changes is approximately $1.1 billion. CIGNA Corporation is one of the largest financial services holding companies in the United States with $69.8 billion in assets and shareholders' equity of $5.7 billion at yearend 1992. CIGNA's subsidiaries are major providers of group life and health insurance, managed care products and services, retirement products and services, individual financial services, property and casualty insurance, and asset management. Its property and casualty group is the eleventh largest in the United States, and the corporation's lead life insurance company, Connecticut General, is the seventh largest in the United States. Consolidated revenue for CIGNA and its affiliates was $18.6 billion. Revenues for 1992 were distributed as follows: life and health insurance segments (61 percent), property and casualty segment (38 percent), and all other segments (1 percent). CIGNA's property and casualty business segment recorded an after-tax operating loss of $485 million in 1992, as compared to an operating loss of $43 million in 1991. It is estimated that statutory surplus declined by nearly $650 million during 1992, which resulted in an increase in the ratio of net written premium to statutory surplus to 3.0 to 1 at the end of the year. This increase is up from a ratio of 2.6 to 1 at the end of the previous year. CIGNA's property and casualty unit's loss reserves have experienced adverse development over the past several years, and in the third quarter of 1992 the adverse reserve development was magnified by a $140 million charge tied to catastrophic losses and uncollectible reinsurance from the London reinsurance book of business. Given the company's long-tail mix of business, and based on historical results, loss reserves are expected to continue to develop adversely. Results during 1992 were also impacted by $223 million of pre-tax losses from hurricanes Andrew and Iniki, the December East Coast winter storm, and the Los Angeles riots. At yearend 1992, CIGNA's consolidated debt was 19.2 percent of total capitalization, up slightly from 17.4 percent at the end of the previous year. In January, 1993, CIGNA issued an additional $200 million of senior notes, which if included in the 1992 year-end results would have resulted in a debt to total capitalization ratio of 21.4 percent. Earnings are estimated at 1.1 times fixed charges for 1992, down from 3.4 times at the end of 1991. CIGNA does not have same direct asset exposure to under-performing mortgage loans and non-investment grade bonds that has impacted some life insurance companies because a large percentage of pension contracts are written on an experienced rated basis. Of the company's total mortgage investments, approximately 66 percent are tied to experience rated contracts, and 41 percent of bond investments are tied to experience rated contracts. While the exposure to asset quality problems has been mitigated somewhat, any significant impairments to the portfolios may cause a drag on earnings. -0- 3/3/93 /CONTACT: James B. Auden, CFA, 312-368-3146, or Timothy A. Bienek, 312-368-3192, both of Duff & Phelps Credit Rating Co./ (CI)
CO: CIGNA Corporation ST: Connecticut IN: INS SU: RTG
LR -- NY043 -- 2437 03/03/93 12:02 EST
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|Date:||Mar 3, 1993|
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