Credit rating agency AM Best assigned the Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Ratings of “a” to the main life/health units, health maintenance organizations and New Zealand as well as Europe-based insurance companies of Cigna Corporation CI. This action followed the closure of Cigna’s pending acquisition of Express Scripts Holding Company. The outlook of the aforementioned ratings is stable.
Notably, the credit rating giant has also removed from under review and has affirmed the FSR of A- (Excellent) along with the Long-Term ICR of “a-” of Medco Containment Life Insurance Company and Medco Containment Insurance Company of New York. The mentioned companies are arms of Express Scripts and the current parent company, Cigna.
Rationale Behind the Ratings
Most of Cigna’s operating entities are referred to as Cigna Life & Health Group. Their ratings reflect the company’s robust balance sheet with abundant cash flow from operations, excellent operating performance, impressive business profile and enterprise risk management (ERM). Other reasons behind the ratings are its high financial leverage and goodwill of the parent company. Moreover, there is an execution risk related to the merger between Cigna and Express Scripts.
The ratings of Medco Containment Group reflect its solid balance sheet, strong underwriting leverage, liquidity, standard operating performance, ERM and its restricted business profile. However, the upside is partially offset by cash-flow uncertainty.
Also, the ratings of Cigna Life Insurance Company of Europe and New Zealand represent a firm balance sheet, decent operational excellence, neutral business profile and an accurate ERM.
Shares of this Zacks Rank #2 (Buy) company have lost 9.3% in a year’s time, narrower than the industry's decline of 22.4%. The company has been suffering high debt level and escalating expenses, which weigh on its performance. However, solid fundamentals such as acquisitions, robust Global Health Care Segment, a strong balance sheet and an increasing membership help the stock bounce back going forward.
Other Stocks to Consider
Investors interested in the insurance-multi line industry might also take a look at a few other top-ranked stocks like MGIC Investment Corporation MTG, CNO Financial Group, Inc. CNO and MetLife, Inc. MET.
MGIC Investment Corporation offers private mortgage insurance and ancillary services to lenders and government sponsored entities in the United States. The stock sports a Zacks Rank #1 (Strong Buy). It came up with average four-quarter positive surprise of 34.32%. You can see the complete list of today’s Zacks #1 Rank stocks here.
CNO Financial develops, markets and administers health insurance, annuity, individual life insurance and other insurance products in the United States. It pulled off average four-quarter earnings surprise of 11.7%. The company has a Zacks Rank of 2.
MetLife provides solutions to insurance, annuities, employee benefits and asset management businesses. It delivered average four-quarter beat of 9.67%. The company is a Zacks #2 Ranked stock.
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Cigna Corporation (CI) : Free Stock Analysis Report
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