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The credit ratings of US health insurer Cigna Corporation and its insurance subsidiaries have been placed under review with negative implications by AM Best.
The rating actions follow the firm’s plan to acquire pharmacy benefit manager Express Scripts Holding Company for $67 billion in a combination of cash and stock.
As a result of the issuance of $22.5 billion of new debt to finance the transaction, combined with the existing debt at Cigna and Express Scripts, Cigna’s financial leverage is expected to be approximately 49 percent, and its goodwill plus intangibles to equity ratio will likely exceed 125 percent.
The ratings agency stated its concern about the increased debt and limited financial flexibility that the new combined organisation will have and the potential for increased dividends from the insurance operations.
In addition, the transaction is the largest Cigna has undertaken and presents significant execution risks. Furthermore there is concern for potential losses of Express Scripts customers following the transaction, which could negatively impact earnings and revenues, AM Best noted.
Cigna, AM Best, Express Scripts, Ratings agency, Credit rating, US
