NU Online News Service, Nov. 18, 2003, 2:10 p.m. – Prudential Financial, Inc. reached an agreement to buy Cigna Corp.’s retirement business for $2.1 billion in cash.
The definitive agreement between Pru, Newark, N.J., and Cigna, Philadelphia, is part of a broader plan to refocus Pru. A final closing is expected in the first half of 2004 and will be accretive to Pru’s earnings per share in that year.
Earlier this month, Pru completed the sale of its property-casualty business to Liberty Mutual Group and its New Jersey p-c operations to Palisades Group. And earlier this year, Pru and Wachovia Corp., Charlotte, N.C. announced a merger of their retail brokerage operations. Pru retains a 38% interest in the new operation.
As part of its refocusing effort, Pru purchased American Skandia, Inc. at the end of 2002.
The transaction will add $52 billion to its assets under management and increase its retirement assets to nearly $120 billion, based on account values, according to Pru.
Andrew Kligerman, an analyst with UBS, New York, says in a report on the agreement that the acquisition could lift Pru’s return on equity by 0.9% and add at least 30 cents in annualized earnings per share.
The transaction could boost Pru’s ROE above 12% by year-end 2005, Kligerman says.
Kligerman notes that it is unclear whether the deal would be completed as a reinsurance transaction. A reinsurance transaction could require additional statutory capital, according to Kligerman.