Prudential Financial’s $2.1 billion purchase of Hartford-based company CIGNA’s retirement services could result in 200 lost jobs.
CIGNA employs about 1,200 people in its retirement services department, which is based mostly in Hartford and in Dubuque, Iowa.
“Based on financial and staffing projections … Prudential Financial expects that approximately 600 of the current 800 CIGNA retirement jobs currently in Connecticut, or 75 percent, will remain in Connecticut at the end of a 12- to 18-month integration period,” said Prudential spokesman Darrell Oliver.
Prudential predicted that 30 percent of the projected 200 lost jobs will be reduced through attrition, Oliver said.
But those numbers, which Prudential executives discussed in a March 4 public hearing with the Connecticut Department of Insurance, could change depending on the companies’ growth, according to Ken Ferraro, director of CIGNA Retirement & Investment Services.
“All employees of the full-service retirement organization will transition to Prudential,” Ferraro said two days before the hearing. Ferraro himself will become a Prudential employee.
But what happens to the jobs after the transition is up to Prudential.
A ‘Premier’ Provider
CIGNA Retirement & Investment Services President John Y. Kim will take the helm of the combined business and Scott Sleyster, the current president of Prudential Retirement, will head the combined full-service defined contribution business, defined benefit administration and total retirement outsourcing, and will report to Kim.
The change will not affect customers, Ferraro said.
“Our clients will have the same product and service suite,” he said. “No change, no disruption.”
CIGNA’s sale of its retirement services is one of the last steps in the company’s move toward shrinking its focus, said CIGNA Vice President of Corporate and Executive Communications Wendell Potter.
The company will focus on providing health care benefits and group insurance, Potter said.
“It’s the result of a long-term strategy,” he noted.
The company has been moving toward that goal since the 1990s, Potter said.
“We’ll now concentrate fully on being a leading provider of health care and disability, life and accident insurance benefits programs for employers and their employees,” said CIGNA Chairman and Chief Executive Officer H. Edward Hanway in a prepared statement. “This transaction enables us to pursue that objective with a heightened sense of urgency – focused exclusively on delivering the health and insurance solutions our customers demand. We intend to capitalize on our considerable strengths in these areas to accelerate our profitable growth.
“The sale is certainly a positive development. Prudential, committed to growth in the markets served successfully by our retirement organization, is acquiring a profitable, well-managed operation with a broad range of products and programs and a team of knowledgeable, experienced professionals. Moreover, retirement plan sponsors and participants can expect to receive from Prudential the same high level of quality, product innovation and service they have come to expect from us.”
The company has been selling its other divisions, as well. CIGNA has sold its property and casualty insurance division, its re-insurance division and its individual life insurance division. It also acquired the health care company Health Source in 1997.
One side effect of CIGNA’s restructuring so far, however, has been layoffs.
“We announced in November we would be making job reductions,” Potter said. “Some functions will not be needed going forward.”
CIGNA had a total of about 6,000 employees in Connecticut, before the sale of the retirement services. About 800 of those are retirement services employees who will move to Prudential after the transaction is final.
The purchase will push Prudential into position as one of the country’s leading providers of retirement services and will add $52 billion to Prudential’s assets.
The purchase does not include CIGNA Investment Management, its third-party asset management unit, Times Square Capital Management, or CIGNA’s corporate life insurance operations.
The transaction increases Prudential Retirement’s assets to nearly $120 billion, based on account values, and will double its defined contribution record-keeping assets to $56 billion.
“A strong presence in the retirement market is essential for success in asset gathering and asset management,” said Prudential Financial Chairman and Chief Executive Officer Arthur Ryan in a prepared statement. “This transaction with CIGNA builds on our presence in the retirement market by adding significant scale and capabilities, while offering attractive returns to shareholders.”
Prudential filed an application for the purchase with the Connecticut Department of Banking in early January, according to that department’s Web site. The initial announcement of the sale came in November.
Prudential executives expect the purchase will close in the first half of this year. The transaction likely will be credited to the earnings per share of Prudential for 2004.
Both CIGNA and Prudential will continue operating under their current names until the closing, when CIGNA’s retirement services will become part of Prudential’s investment division.
CIGNA’s retirement services had $50 billion in retirement account value, about 1.1 million defined contribution plan participants and about 700,000 defined benefit annuitants and participants as of Sept. 30, 2003.
CIGNA focuses mainly on the Taft-Hartley markets and targets plan sponsors that have between 1,000 and 10,000 participants and assets between $20 million and $200 million.
Prudential Retirement also has 1.1 million defined-contribution participants and 600,000 defined-benefit annuitants, with $67 billion in retirement account values as of Sept. 30, 2003.
“We will combine the best from both companies to become a premier retirement services provider in the markets we choose to serve,” said Prudential Financial Vice Chairman John Strangfeld in a news release.
Prudential, based in New Jersey, had about $421 billion in total assets as of Sept. 30, 2003.
