Cigna downgraded to ‘negative’

The outlook of Cigna Corp., a Philadelphia-based health insurer, has been downgraded to “negative” by Standard and Poor’s of New York. The ratings agency also gave Cigna’s subsidiary Connecticut General Life Insurance Co. in Bloomfield a “negative” outlook, bringing both companies down from “stable.” “The ‘negative’ outlook reflects Cigna’s weaker earnings and increased liabilities resulting from its relatively high exposure to equity markets in its runoff reinsurance business and from its pension plan,” Shellie Stoddard, a credit analyst with S&P, said in a statement. During the first nine months of the year, Connecticut General was hit with $72 million in losses on its reinsurance of annuities with guaranteed-minimum death benefits. The company forecast another $125 million in losses for the fourth quarter, S&P noted. Cigna’s reinsurance of annuities with a guaranteed-minimum-income benefit could also experience economic losses despite being 55% reinsured, because it isn’t hedged for market and interest rate volatility, S&P noted. Those losses will reduce Connecticut General’s statutory capital until 2009 earnings are earned and retained. Last week, Cigna reported $171 million in third-quarter profit, or 62 cents per basic share, down from $365 million, or $1.30 per share, in the year-earlier period. The carrier also released an announcement insisting that it has no need or intention to issue equity, that it won’t issue additional long-term debt this year under current conditions and that its capitalization remains “strong and well in excess of regulatory requirements.”