Firm Advises Berkshire Hathaway in $4 Billion Reinsurance Transaction with CIGNA

February 5, 2013

Willkie advises Berkshire Hathaway in a reinsurance transaction in which Berkshire Hathaway reinsures $4 billion of guaranteed minimum death benefit and guaranteed minimum income benefit exposure of CIGNA.

On February 4, Willkie client Berkshire Hathaway Life Insurance Company of Nebraska entered into a reinsurance transaction with Connecticut General Life Insurance Company (a subsidiary of Cigna Corporation (Cigna)), pursuant to which Berkshire Hathaway reinsured $4 billion of guaranteed minimum death benefit (GMDB) and guaranteed minimum income benefit (GMIB) exposure of Cigna. The GMDB and GMIB exposures arise out of deferred annuities issued by other U.S. insurance companies and reinsured by Cigna.

Such annuities contain (i) guarantees of minimum death benefits in the event the holder of the annuity dies, regardless of the then current account value under the annuity and/or (ii) the right to receive a minimum guaranteed income amount if the holder of the annuity elects to convert the annuity to payment status. These features are designed to protect the annuity holder (or his/her heirs in the event of death) against negative fluctuation in the stock market.

In entering into the transaction, Cigna was seeking to remove the volatility of these product features from its financial statements.

The deal was handled by partner Donald Henderson and associate Joshua Halpern.