A.M. Best Downgrades Ratings of Great-West’s Healthcare Subsidiaries

A.M. Best Co. has downgraded the financial strength rating (FSR) to A- (Excellent) from A (Excellent) and the issuer credit rating (ICR) to “a-” from “a+” of Great-West Healthcare of California, Inc., Great-West Healthcare of Colorado, Inc., Great-West Healthcare of Illinois, Inc. and Great-West Healthcare of Texas, Inc. The existing FSRs, ICRs and debt ratings of Great-West Lifeco, Inc. (Great-West) (Winnipeg, CN) [TSX:GWO] and its other subsidiaries are unchanged. The outlook for all ratings is stable.

These rating actions follow Great-West’s recent announcement of its definitive agreement to sell its healthcare operations to a subsidiary of CIGNA Corporation as part of completing its financing for the recent acquisition of Putnam Investments, LLC (Putnam). In addition, this announcement signifies a shift in Great West’s market focus from health care to financial services.

The health care operations are valued at an estimated USD 2.2 billion. Great-West anticipates gross proceeds of USD 1.5 billion in cash through ceding commissions. The balance of the transaction (USD 750 million) will stem from Great-West’s equity that is invested in its health care business, which is no longer required to support the liabilities of the health care operations at its U.S. subsidiary, Great- West Life and Annuity Insurance Company (GWL&A) (Greenwood Village, CO). The net proceeds of this transaction after taxes are expected to be USD 1.6 billion. A.M. Best expects the net proceeds will be used to repay bridge financing associated with the Putnam transaction.

Furthermore, despite the slight decline in debt-to-capital and the potential increase in fixed charge coverage, Great-West remains within A.M. Best’s expectations for its current ratings.

For Best’s Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.