Express Scripts Holding Co. Upgraded To 'A-' Following Cigna's Receipt Of Approval

  • U.S. health insurer Cigna Corp. has received all state regulatory approvals to complete its acquisition of pharmacy benefit manager (PBM) Express Scripts Holding Co.
  • Halfmoon Parent Inc. (New Cigna) will become the new ultimate parent of the group.
  • We raised all our ratings, on Express Scripts Holding Co. and its subsidiaries to 'A-' from 'BBB+'. We are also removing the ratings from CreditWatch positive, where we placed them on Sept. 4, 2018. The outlook is negative.
  • We affirmed our 'A-2' short-term rating on the company.
  • We view Express Scripts and its subsidiaries (the Express Scripts subgroup) as core subsidiaries of Halfmoon (New Cigna), and are equalizing the ratings on a go-forward basis.
NEW YORK (S&P Global Ratings) Dec. 19, 2018—S&P Global Ratings today took the 
rating actions listed above. The upgrade follows Cigna's receipt of regulatory 
approvals for its acquisition of Express Scripts. Halfmoon Parent Inc. (New 
Cigna) will be the parent of legacy Cigna and Express Scripts. We are raising 
our rating of Express Scripts Holdings Co. and all its subsidiaries (the 
Express Scripts subgroup) to the level of Halfmoon, reflecting our assessment 
of the Express Scripts subgroup as a core subsidiary of Halfmoon. 

The negative outlook reflects the potential for a one-notch downgrade in 
2019-2020 if Cigna encounters business and/or integration setback and cannot 
reduce leverage below 40%. In addition, we may lower the ratings if its 
consolidated insurance capital adequacy falls below 'BBB' on a sustained 

We expect Cigna to generate pro forma revenue of $145 billion-$155 billion in 
2019 and $140 billion-$150 billion in 2020 (with the drop-off in 2020 largely 
the result of losing the Anthem contract). In addition, we expect pro forma 
adjusted EBITDA of $13 billion-$13.5 billion in 2019 and $11.5 billion-$12.5 
billion in 2020. We expect pro forma adjusted EBIT of $10.5 billion-$11.5 
billion in 2019 and $9.5 billion-$10.5 billion in 2020. We expect Cigna's pro 
forma adjusted EBIT rate of return to be about 6%-7% on a run-rate basis.

We expect Cigna to utilize at least half of its free cash flows (after capital 
expenditures) of $6 billion-$7 billion in 2019 and $5 billion-$6 billion in 
2020 toward debt repayment. We expect financial leverage of 49% (post close as 
of year-end 2018), 40%-50% as of year-end 2019, and 35%-40% as of year-end 
2020, and debt-to-EBITDA of 2x-3x during the same period. We expect adjusted 
EBITDA interest coverage of 6x-8x in 2019-2020, which is adequate for the 

We may lower our ratings on Express Scripts if we lower our ratings on New 
Cigna based on New Cigna's business performance, leverage, and capital 
adequacy in 2019-2020.

We may affirm the current ratings with a stable outlook if we affirm the 
rating on New Cigna and revise the outlook to stable, which we will base on 
New Cigna's business performance, leverage, and capital adequacy in 2019-2020.
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