A.M. Best Co. has downgraded debt ratings and some financial strength ratings for Philadelphia-based Cigna Corp., but Standard & Poor's Corp. kept its current ratings on the insurer.
Best, based in Oldwick, N.J., downgraded Cigna's senior debt rating from bbb to bbb- and its preferred stock rating from bb+ to bb, while Best's rating for Cigna's financial strength fell from A to A-, the company said in a release Tuesday.
But Best added that debt and financial strength ratings for Cigna still have "a stable outlook."
Best says the downgrade is in reaction to Cigna's announcement on Monday to sell its retirement business to Newark, N.J.-based Prudential Financial for $1.7 billion.
"Historically, Cigna's stable and profitable retirement business, which contributes approximately 25% of consolidated earnings, has lifted the corporation's ratings," Best says in the release.
The sale "could further challenge Cigna's earnings and debt service coverage during the medium term, driving the ratings downgrades," Best adds.
In announcing the sale, Cigna said it will use part of the proceeds to bolster its ailing healthcare unit, the company's largest segment.
Although Cigna posted a quarterly profit in October and forecast earnings for 2003 and 2004 above Wall Street estimates, its healthcare sector reported lower profits and membership for the sector dropped from 13.1 million a year ago to 11.8 million.