Fitch Ratings said it’s maintaining a negative watch on ratings for Bloomfield-based Cigna Corp. following the completion of a periodic review of the insurer’s ratings.
Fitch had placed Cigna’s ratings on negative watch on July 24, 2015, following the announcement that Cigna agreed to be acquired by Anthem Inc. Excluding the ratings-negative aspects of that planned acquisition, Fitch believes its review would have resulted in affirming Cigna’s ratings with stable outlooks.
Cigna’s negative watch status reflects Fitch’s expectation that Anthem’s post-acquisition financial leverage metrics will be meaningfully higher and its interest-coverage ratios will be meaningfully lower than Cigna’s have been in recent years, Fitch said in a news release.
The negative watch status also reflects potential earnings disruptions that could arise in the short term after the acquisition’s close, as Anthem integrates Cigna from an operational and management perspective, Fitch said.
The primary drivers of Cigna’s ratings going forward will be financial leverage and debt service.
Anthem is expected to issue an estimated $22 billion of debt to partially fund its acquisition of Cigna, significantly weakening financial leverage ratios, Fitch said. The deal is still awaiting regulatory approvals.
Fitch Ratings has maintained the Rating Watch Negative for Cigna’s ‘A-‘ Issuer Default Rating (IDR), ‘BBB+’ senior unsecured notes, and the ‘A+’ Insurer Financial Strength (IFS) ratings of certain subsidiaries.
