Moody's: Cigna deal with Berkshire a credit positive
February 14, 2013 by Michael K. Stanley
Moody’s Investor Service (Moody’s) views the recent announcement by Cigna Corporation (Cigna) to reinsure its variable annuity business as a credit positive for the company.
Last week, Cigna announced that they had arrived at a definitive agreement with Berkshire Hathaway Life Insurance Company, a subsidiary of Berkshire Hathaway Inc. (Berkshire), to reinsure its guaranteed minimum death benefits and guaranteed minimum income benefits businesses, both of which are currently in runoff.
Under the agreement, Cigna will pay Berkshire $2.2 billion which it will fund through the sale of $1.8 billion of assets that supported the runoff business, an estimated $300 million tax-benefit associated with the deal and $100 million in cash. Berkshire’s liability under the agreement is capped at $4 billion although Cigna cautioned that exceeds current projections for future variable annuity death benefit and guaranteed minimum income benefit claims. Click here to read…
