Citing a 24% drop in shareholder equity last year, ongoing problems impacting the health insurer's variable annuity business and Cigna’s debt and capital levels, Fitch Ratings delivered a blow to Cigna Corp. today as it cut the insurer’s credit ratings. This news, reported by Dow Jones Newswires, follows a similar cut made by Standard &Poor’s Rating Services last month.

Although couched with the notification that Cigna’s access to liquidity is not a concern, shareholder equity has been hurt by an $861 million adjustment of Cigna's postretirement benefits liabilities, reports Dow Jones. Additionally, Cigna’s acquisition last year of Great-West Healthcare increased the insurer’s debt levels.

Fitch downgraded its issuer default rating on Cigna and its units by one notch to BBB+ and A, respectively. BBB+ is three steps from junk territory, reports Dow Jones.

However, the ratings' outlook was changed to “stable” from “negative” after the downgrade amid Fitch's expectations for "good" earnings this year and planned efforts to strengthen capital. In February, Cigna said it swung to a fourth-quarter loss due in part to investment losses. The company also lowered its 2009 earnings outlook, saying rising unemployment would cut enrollment.

A.M. Best Co., meanwhile affirmed the financial strength rating of A (Excellent) and issuer credit ratings (ICR) of “a” of Zenith National Insurance Group and its members, Zenith Insurance Co. (Zenith) and ZNAT Insurance Co. (ZNAT), a wholly owned subsidiary of Zenith. The outlook for all ratings is “stable.” Best attributed its rating to the company’s superior capitalization, strong operating performance in a competitive market and its commitment to maintain disciplined underwriting during this market cycle.

Removing Cayman Islands-based Ironshore Inc. from under review with negative implications, A.M. Best Co. affirmed the issuer credit rating (ICR) of bbb-, and affirmed the financial strength rating of A- (Excellent) and ICR of "a-" of Ironshore's operating subsidiaries.

These include Ironshore Insurance Ltd., Ironshore Reinsurance Ltd (both of Bermuda), Ironshore Indemnity Inc. (Minneapolis, Minn.) and Ironshore Specialty Insurance Company (Phoenix, Ariz.). The outlook assigned to all ratings is “stable,” A.M.Best reports.

A.M. Best noted that it had placed the insurer’s ratings under review with negative implications on Feb. 3, 2009, "which was reflective of the material deviation from its original business plan and the execution risks of its new business model. Since that time, Ironshore has successfully executed its new business initiatives despite challenging market conditions.

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