Cigna rating placed under review due to debt burden
AM Best has placed the credit ratings of US health insurer Cigna Corporation and its insurance subsidiaries under review with negative implications following the firm’s plan to acquire Express Scripts Holding Company for $67 billion.
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 voiced 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.
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