Cigna 2012 Annual Report Download - page 99

PART II
ITEM 8 Financial Statements and Supplementary Data
Acquisitions and Dispositions
The Company may from time to time acquire or dispose of assets, allocated to the tangible and intangible net assets acquired based on
subsidiaries or lines of business. Significant transactions are described management’s preliminary estimates of their fair value and may
below. change as additional information becomes available over the next
several months. Accordingly, approximately $117 million was
allocated to identifiable intangible assets, primarily a distribution
A. Joint Venture Agreement with
relationship and the value of business acquired (‘‘VOBA’’) that
Finansbank
represents the present value of the estimated net cash flows from the
long duration contracts in force, with the remaining $113 million
On November 9, 2012, the Company acquired 51% of the total
allocated to goodwill. The identifiable intangible assets will be
shares of Finans Emeklilik ve Hayat A.S. (‘‘Finans Emeklilik’’), a
amortized over an estimated useful life of approximately 10 years.
Turkish insurance company, from Finansbank A.S. (‘‘Finansbank’’), a
Goodwill has been provisionally allocated to the Global Supplemental
Turkish retail bank, for a cash purchase price of approximately
Benefits segment and is not deductible for federal income tax
$116 million. Finansbank continues to hold 49% of the total shares.
purposes.
Finans Emeklilik operates in life insurance, accident insurance and
pension product markets. The acquisition provides Cigna The redeemable noncontrolling interest is classified as temporary
opportunities to reach and serve the growing middle class market in equity in the Company’s Consolidated Balance Sheet because
Turkey through Finansbank’s network of retail banking branches. Finansbank has the right to require the Company to purchase its 49%
In accordance with GAAP, the total purchase price, including the interest in the value of its net assets and the inforce business in
redeemable noncontrolling interest of $111 million, has been 15 years.
The condensed balance sheet at the acquisition date was as follows:
(In millions)
Investments $23
Cash and cash equivalents 54
Value of business acquired (reported in Deferred policy acquisition costs in the Consolidated Balance Sheet) 28
Goodwill 113
Separate account assets 99
Other assets, including other intangibles 100
Total assets acquired 417
Insurance liabilities 58
Accounts payable, accrued expenses and other liabilities 33
Separate account liabilities 99
Total liabilities acquired 190
Redeemable noncontrolling interest 111
Net assets acquired $ 116
The results of Finans Emeklilik are included in the Company’s In accordance with GAAP, the total purchase price has been allocated
Consolidated Financial Statements from the date of acquisition. The to the tangible and intangible net assets acquired based on
pro forma effects on total revenues and net income assuming the management’s preliminary estimates of their fair value and may
acquisition had occurred as of January 1, 2011 were not material to change as additional information becomes available over the next
the Company for the years ended December 31, 2012 and 2011. several months. The Company updated its allocation of the purchase
price in the fourth quarter of 2012 with the completion of fair
valuation procedures for insurance liabilities and the resolution of
B. Acquisition of Great American
certain tax matters. These changes resulted in an increase in the
Supplemental Benefits Group
allocation to the insurance liabilities by $73 million to $707 million
On August 31, 2012, the Company acquired Great American and to the VOBA asset by $73 million to $144 million. In addition,
Supplemental Benefits Group, one of the largest providers of the allocation to tax accounts was increased by $15 million to a
supplemental health insurance products in the U.S. with cash from $7 million asset. Approximately $168 million was allocated to
internal resources. The Company finalized the purchase price in the intangible assets, primarily the VOBA asset that will be amortized in
first quarter of 2013 that resulted in an increase of $19 million to proportion to premium recognized over the life of the contracts that is
$326 million. The acquisition provides the Company with an estimated to be 30 years. Amortization is expected to be higher in
increased presence in the Medicare supplemental benefits market. It early years and decline as policies lapse. Goodwill has been allocated to
also extends the Company’s global direct-to-consumer retail channel the Global Supplemental Benefits segment as of December 31, 2012.
as well as further enhances its distribution network of agents and Substantially all of the goodwill is tax deductible and will be
brokers. Subsequent to the segment reporting changes in 2012, results amortized over the next 15 years for federal income tax purposes.
of this business are reported in the Global Supplemental Benefits
segment.
CIGNA CORPORATION - 2012 Form 10-K 77
NOTE 3