Moody’s has downgraded Health Care Service Corporation’s insurance financial strength rating to A3 from A2 following the company’s acquisition of Cigna’s Medicare business on March 19.
Moody’s cited likely challenges with the integration of the MA business into the company’s primarily commercial insurance operations, along with ongoing headwinds within the MA industry more broadly.
“Another concern is the limited experience the company has with making and integrating major acquisitions in the recent past,” analysts wrote. “The company expects to invest an estimated $1 billion over the next two years into updating systems and for working capital to ensure its success, but this may prove to be insufficient.”
Moody’s did change HCSC’s rating outlook from negative to stable, writing that the company has significant scale in the commercial business, a solid capital position, low financial leverage, and a high percentage of tangible equity. As the parent company of BCBS Illinois, Texas, New Mexico, Montana, and Oklahoma, the company has a top market position in several states.
HCSC purchased Cigna’s MA, Medicare Part D and supplemental benefits businesses, along with its value-based care management subsidiary, CareAllies.
The $3.3 billion deal was first announced in January 2024. As of February, Cigna had nearly 700,000 MA members.
