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Insurance Industry News from ProgramBusiness.comCIGNA Sells Unit to Prudential
Cigna Corp. (CI.N:) has agreed to sell its retirement and investment services business to Prudential Financial Inc. (PRU.N:) for $2.1 billion in cash, allowing the company to refocus on its core health insurance business, the companies said on Monday. The deal frees Cigna, based in Philadelphia, of a unit that has struggled in the past year to overcome the prolonged stock market swoon. The subsidiary, which boasts $56 billion in assets under management, earned $58 million during the recently completed third quarter, up 2 percent from a year earlier. Cigna's unit sale excludes its corporate life insurance unit and its investment advisory operation, TimesSquare Capital Management Inc. Proceeds will be used to support its ratings, reduce debt and buy back shares, the company said. Cigna said it plans to cut some costs after the deal and fine tune its life, health and accident insurance product offerings. Sources told Reuters in October that Prudential emerged as the most likely buyer of the Cigna unit and the two companies were in discussions.
At Prudential, its retirement business' assets will rise to nearly $120 billion and by 2 million participants, while adding Cigna's defined benefit and defined contribution products to its product line. Prudential has no sizable defined benefit outsourcing capabilities -- an area where Cigna is strong. The agreement allows the sale price to be reduced by $250 million if the financial strength rating of Connecticut General Life Insurance Company - a Cigna subsidiary that underwrites much of the business sold by Cigna's retirement business - is downgraded to BBB+ by Standard & Poor's or to Baa1 by Moody's before the sale closes. Prudential could terminate the agreement if the ratings were to be reduced below either of those levels. Cigna said it considers downgrades to these levels to be unlikely, since that unit carries ratings of "A" from Standard & Poor's and "A2" by Moody's.
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