Cigna Gains after Berkshire Deal
Northern, WI 02/06/2013 (gdpwatch) – The third-largest health insurance company Cigna Corp.(NASDAQ:CI) advanced to its highest value in about three decades after it announced a $2.2 billion transaction that involves the transfer of death-benefit liabilities to Berkshire Hathaway Inc. (NYSE:BRK.A) which is owned by Warren Buffet.
Cigna rose 3.5 percent to close at $60.38 in New York. This is the company’s highest share probably since April 1982. The company, based in Bloomfield, Connecticut, made a statement that a reinsurance agreement had been made for the business of variable-annuity death-benefits that it had been trying to depart from.
The Omaha, Nebraska-based Berkshire acceded to take on liabilities of about $4 million in the transaction. The deal is funded by Cigna with investment assets worth $1.8 billion, cash of $100 million and tax benefit of approximately $300 million. Berkshire went up 1.3 percent to $146, 825 and has gained 23 percent in the last year. During that time, Cigna rose 39 percent.
Insurance float has been used Buffet to boost growth in Berkshire for the last 40 years. Ajit Jain, who is the reinsurance chief in the company, had a hand in the raising of the funds which was a total of $72 million by the end of September. The funds were raised by making deals with firms that include American International Group Inc. (NYSE:AIG) and CNA Financial Corp. (NYSE:CAN) to adopt asbestos liabilities and to deal in protection for natural disasters that are the most expensive.
The CEO of Cigna David M. Cordani said on a conference call yesterday that Buffet is using liabilities from units that have active policies of about 435,000 in number which fell 10per cent during 2012. The sale of Cigna is will not affect its predicted earnings or plans for capital deployment. Cigna CFO Ralph Nicolleti says that payments to Berkshire will be completed before the end of2013.
The shares of Cigna Corp. (NASDAQ:CI) were down by 1.74% and currently trading at $59.33
The shares of Berkshire Hathaway Inc. (NYSE:BRK.A) were down by 0.27% and currently trading at $146,432.50
The shares of American International Group Inc. (NYSE:AIG) were down by 0.44% and currently trading at $38.58
The shares of CNA Financial Corp. (NYSE:CAN) were down by 0.35% and currently trading at $31.49