Cigna 2011 Annual Report Download - page 101

79CIGNA CORPORATION2011 Form10K
PART II
ITEM 8 Financial Statements and Supplementary Data
NOTE 3 Acquisitions and Dispositions
e Company may from time to time acquire or dispose of assets,
subsidiaries or lines of business. Signicant transactions are described below.
A. Acquisition of HealthSpring, Inc.
On January31,2012 the Company acquired all of the outstanding
shares of HealthSpring,Inc. (“HealthSpring”) for $55 per share in cash
and Cigna stock awards, representing an estimated cost of approximately
$3.8billion. HealthSpring provides Medicare Advantage coverage in
11 states and the District of Columbia, as well as a large, national
stand-alone Medicare prescription drug business. e Company
funded the acquisition with internal cash resources, including cash
generated from the issuance of commercial paper in 2012, as well as
$2.1billion of additional debt and $650million of new equity issued
during the fourth quarter of 2011 ($629million net of underwriting
discount and fees).
B. Acquisition of FirstAssist
In November2011, the Company acquired FirstAssist Group Holdings
Limited (“FirstAssist”) for approximately $115million, using available
cash on hand. FirstAssist is based in the United Kingdom and provides
travel and protection insurance services that the Company expects will
enhance its individual business in the U.K. and around the world.
In accordance with GAAP, the total purchase price has been allocated to
the tangible and intangible net assets acquired based on management’s
preliminary estimates of their fair values and may change when appraisals
are nalized and as additional information becomes available over
the next several months. Accordingly, approximately $58million was
allocated to intangible assets, while $56million has been allocated to
goodwill and is reported in the International segment.
e results of FirstAssist are included in the Company’s Consolidated
Financial Statements from the date of acquisition. e pro forma eect
on total revenues and net income assuming the acquisition had occurred
as of January1,2010 were not material to the Company’s total revenues
and shareholders’ net income for the years ended December31,2011
and 2010.
C. Reinsurance of Run-off Workers’
Compensation and Personal Accident
Business
On December31,2010, the Company essentially exited from its
workers’ compensation and personal accident reinsurance business
by purchasing retrocessional coverage from a Bermuda subsidiary of
Enstar Group Limited and transferring administration of this business
to the reinsurer. Under the reinsurance agreement, Cigna is indemnied
for liabilities with respect to its workers’ compensation and personal
accident reinsurance business to the extent that these liabilities do not
exceed 190% of the December31,2010 net reserves. e Company
believes that the risk of loss beyond this maximum aggregate is remote.
e reinsurance arrangement is secured by assets held in trust. Cash
consideration paid to the reinsurer was $190million. e net eect
of this transaction was an after-tax loss of $20million ($31million
pre-tax), primarily reported in other operating expenses in the Run-o
Reinsurance segment.
D. Sale of Workers’ Compensation and Case
Management Business
On December1,2010 the Company completed the sale of its workers’
compensation and case management business to GENEX Holdings,Inc.
e Company recognized an after-tax gain on sale of $11million
($18million pre-tax) which was reported in other revenues in the
Disability and Life segment. Proceeds of the sale were received in
preferred stock of GENEX Holdings,Inc., resulting in the Company
becoming a minority shareholder in GENEX Holdings,Inc. is
investment is classied in other long-term investments and accounted
for using the equity method of accounting.
E. Acquisition of Vanbreda International
On August31,2010, the Company acquired 100% of the voting stock
of Vanbreda International NV (Vanbreda International), based in
Antwerp, Belgium for a cash purchase price of $412million. Vanbreda
International specializes in providing worldwide medical insurance
and employee benets to intergovernmental and non-governmental
organizations, including international humanitarian operations, as well
as corporate clients. Vanbreda International’s market leadership in the
intergovernmental segment complements the Company’s position in
providing global health benets primarily to multinational companies
and organizations and their globally mobile employees in North America,
Europe, the Middle East and Asia.
Contents
Q