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TMCNet:  A.M. Best Places Credit Ratings of Medco Containment Life Insurance Company and Medco Containment Insurance Company of New York Under Review With Developing Implications

[March 13, 2018]

A.M. Best Places Credit Ratings of Medco Containment Life Insurance Company and Medco Containment Insurance Company of New York Under Review With Developing Implications

A.M. Best has placed under review with developing implications the Financial Strength Rating of A- (Excellent) and Long-Term Issuer Credit Rating of "a-" of Medco Containment Life Insurance Company (Mechanicsburg, PA) and Medco Containment Insurance Company of New York (Troy, NY) (collectively referred to as Medco Containment Group). Both companies are subsidiaries of Express Scripts Holding Company (Express Scripts) [NASDAQ: ESRX].

The rating actions follow the recent announcement that Cigna Corporation (Cigna) has signed a definitive agreement to acquire Express Scripts for $67 billion in a combination of cash and stock. The transaction is subject to approval by federal and state regulators and expected to close by Dec. 31, 2018.

Following the issuance of $22.5 billion of new debt to finance the transaction, combined with the existing debt at Cigna and Express Scripts, Cigna's financial leverage is expected to be approximately 49%, with a sizeable increase in its goodwill plus intangibles to equity ratio. The developing implications reflect A.M. Best's concerns that the strategic importance of Medco Containment Group to the overall organization might change following the completion of the transaction.

In addition, the increased debt and limited financial flexibility at the new combined organization might create the potential for incresed dividends from the insurance operations. Furthermore, the transaction is the largest Cigna has undertaken and presents significant execution risks.

This press release relates to Credit Ratings that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best's Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best's Credit Ratings. For information on the proper media use of Best's Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best's Credit Ratings and A.M. Best Rating Action Press Releases.

A.M. Best is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2018 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.


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