March 12, 2018

Moody's places Cigna's rating on review for downgrade following Express Scripts deal

A Wall Street credit ratings agency said Monday it will review Bloomfield health insurer Cigna for a possible ratings downgrade following the company's recent announcement that it plans to buy pharmacy benefits manager Express Scripts for $67 billion.

According to a report by Moody's Investors Service, the deal will "modestly" improve Cigna's risk-based capital level, but it will also limit the company's financial flexibility as it takes on more debt. As part of the cash-stock deal, Cigna will take on $22 billion in new debt and $13 billion in Express Scripts' debt.

Cigna expects to pay $8 billion of debt repayment in the first two years and should generate enough cash flow to meet that level, Moody's said.

"However, the amount of short debt maturing is meaningful and an unexpected event, integration problems, or worse than expected performance could pressure liquidity," Moody's said.

Moody's did say the deal will diversify Cigna's earnings, add a significant level of unregulated cash flows and offer the potential for cost synergies.

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