CONTACTS:
FOR IMMEDIATE RELEASE
OLDWICK, N.J. - MAY 11, 2012 12:00 AM (EDT)
A.M. Best Co. has placed under review with positive implications the financial strength (FSR) and issuer credit ratings (ICR) of Loyal American Life Insurance Company, American Retirement Life Insurance Company, Central Reserve Life Insurance Company and Provident American Life and Health Insurance Company (all headquartered in Austin, TX), following the announcement that Cigna Corporation (Cigna) (Philadelphia, PA) [NYSE: CI] has signed a definitive agreement to purchase these companies from American Financial Group, Inc. (AFG) [NYSE: AFG] for approximately $295 million in cash, subject to post-closing adjustments. (See below for a detailed list of the companies and ratings.)
The four supplemental benefits companies are currently owned by Great American Financial Resources, Inc. (GAFRI), a wholly owned subsidiary of AFG, which is headquartered in Cincinnati, OH. Cigna’s ratings as well as the ratings of GAFRI’s other subsidiaries are unchanged by this announcement.
The Medicare supplement and supplemental health product lines accounted for approximately $400 million of assets, $325 million of revenues and $34 million of AFG’s pre-tax operating earnings in 2011. All long-term care business will remain within two other health insurance entities that are being retained by GAFRI. Additionally, all life and annuity business previously written by the companies being sold will be reinsured to an affiliate, Great American Life Insurance Company, prior to the close of the transaction.
GAFRI’s supplemental health companies historically have had a good market presence in the Medicare supplement market. However, driven by increased competitive pressures in recent years, GAFRI has been challenged to grow this business at profit margins acceptable to AFG. A.M. Best believes that the acquisition will facilitate Cigna’s expansion into the U.S. individual and senior segments, and that the acquired companies should benefit from the vast financial resources of Cigna.
The ratings will remain under review until the transaction closes, which is expected to occur during the second half of 2012 following customary regulatory approval.
The FSR of A- (Excellent) and ICR of “a-” have been placed under review with positive implications for Loyal American Life Insurance Company, a subsidiary of Great American Financial Resources, Inc.
The FSR of B++ (Good) and ICRs of “bbb” have been placed under review with positive implications for the following life/health subsidiaries of Great American Financial Resources, Inc.
- American Retirement Life Insurance Company
- Central Reserve Life Insurance Company
- Provident American Life and Health Insurance Company
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Founded in 1899, A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source.