FONT-SIZE Plus   Neg

Cigna Reaches Agreement With Berkshire Hathaway To Exit Run-off Operations

Cigna Corp. (CI) announced a definitive agreement with Berkshire Hathaway Life Insurance Company of Nebraska, a member of the Berkshire Hathaway Inc. (BRKa, BRKB) group, under which Berkshire will reinsure Cigna's Run-off Guaranteed Minimum Death Benefits or VADBe and Guaranteed Minimum Income Benefits or GMIB businesses effective February 4, 2013.

Cigna said it will fund this transaction with an incremental $100 million of parent company cash, approximately $1.8 billion of investment assets supporting the run-off businesses, and an estimated $300 million tax benefit associated with the transaction.

Cigna noted that Berkshire will assume 100% of Cigna's exposure up to $4 billion of future VADBe and GMIB claims, which is significantly in excess of current projections of future claims for this business. Cigna believes that the potential for actual claims to exceed the limit of the coverage from Berkshire is extremely remote.

Cigna said it expects to record the exit transaction as a special item in the first quarter of 2013, resulting in an after-tax charge of $500 million. The charge represents the amount of payment to Berkshire that is in excess of Cigna's recorded reserves. Realized capital gains resulting from the sale of investment assets supporting the business are expected to range between $50 million and $150 million after-tax, depending on whether the assets are sold externally or transferred to other internal portfolios.

Cigna said that its earnings outlook for 2013, which is based on adjusted income from operations, will not be impacted by this transaction. Cigna also said the transaction does not affect its outlook regarding capital that is available for deployment in 2013.

by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

Business News

Quick Facts

Editors Pick
International Business Machines Corp. (IBM) Monday predicted that Cyber Monday online sales would grow by more than 18 percent compared to 2014. Driven by a surge in mobile shopping, consumers indicate that Samsung, Sony and LG TVs as well as Apple Watch and Beats by Dre are at the top of their shopping... As the Black Friday din settles down, it is time to look back at how various players and products fared and Adobe has offered some insight into just that. Mobiles and smartphones sold like hot cakes, according to online shopping data released by Adobe. After nearly a 2-year hiatus following its announcement that it is testing unmanned drones, Amazon finally offered a glimpse into the prototype and its functioning. It remains to be see if the company can work around regulatory hurdles to make it a reality.
comments powered by Disqus
Trade CI now with 
Follow RTT