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Aetna, Humana drop merger; Cigna wants to end Anthem deal

Health insurers Aetna Inc and Humana Inc walked away from their $34 billion merger on Tuesday and Cigna Corp sought to end its deal with Anthem, shelving the industry consolidation they charted to address former President Barack Obama's Affordable Care Act. Humana also said in a that it would exit the Obamacare individual insurance market after this year, saying that its membership for 2017 was showing signs of an overly expensive group. It was already among insurers that had sharply cut back new members in 2017 after losing money in 2016. President Donald Trump and Republicans have vowed to repeal and replace Obamacare, the national healthcare reform law that created new individual insurance and expanded Medicaid, adding 20 million people to the ranks of the insured. The insurers, in seeking their mergers, had said the combinations would help them grow after adjusting to changes related to the law in everything from how doctors and hospitals are paid to the benefits insurers must provide. The Aetna-Humana and Cigna-Anthem deals were announced in July 2015, and the Justice Department filed a lawsuit a year later saying they were illegal under antitrust law. Federal judges hearing the cases ruled against Aetna's acquisition of Humana on Jan. 23 and Anthem's $54 billion bid for Cigna on Feb. 8. Government antitrust officials had argued that both deals would lead to less competition and higher prices for Americans. The acquisitions would have reduced the number of large national U.S. insurers from five to three.

After the defeat in court, Aetna and Humana initially said they were weighing an appeal. But they opted on Tuesday to scrap the proposed merger, sending Aetna shares up 3.2 percent to $126.06, while Humana fell 0.3 percent to $206.16. Aetna will pay Humana a $1 billion breakup fee, or $630 million after taxes, and terminated its plan to sell some Medicare Advantage assets to Molina Healthcare Inc, the companies said. Humana said its 2017 initiatives as an independent company would include at least $2 billion in share buybacks and net profit of $16.65 to $16.85 per share due in part to the $630 million after-tax payment from Aetna.

Humana is the first insurer to withdraw from the Obamacare exchanges for 2017, but Aetna and Anthem have both said they were waiting to see if lawmakers and the administration would make changes. CIGNA GOES TO COURT

Trian takes $3.5 billion stake in Procter & Gamble Trian Fund Management LP on Tuesday disclosed that it bought a $3.5 billion stake in Procter & Gamble Co, making it the second activist shareholder to take aim at the consumer products giant in the last five years.

GM in talks to sell European auto business to Peugeot LONDON/FRANKFURT In a move that could shake up the global auto industry, General Motors Co and French automaker PSA Group said on Tuesday they are in talks that could result in PSA buying GM's European auto operations.

Syngenta: U.S. regulators' new request won't delay ChemChina deal ZURICH Syngenta has got another request for information from U.S. anti-trust regulators reviewing a proposed $43 billion takeover by ChemChina [CNNCC. UL] but still sees the deal being completed in the second quarter, it said on Tuesday.

U.S. insurers sense opportunity in unwanted pension plans

U.S. insurers are buying corporate pension plans at a record clip as rising interest rates and all-time high stock-market values give companies the perfect excuse to offload them. Calculating they can make more money from selling companies an annuity to cover the cost of the pension plans and then invest the proceeds in bonds and other securities, insurers are competing to persuade corporate America to sell them their pension risk. These deals, known as pension risk transfers, have been around for at least 90 years, but they can be limited by a Catch 22: in good times, corporate leaders feel less of a need to rid their companies of pension burdens, and in bad times it is more expensive to do so."There's a huge opportunity for the insurance industry," said Ellen Kleinstuber, who advises pension-plan sponsors as an actuary for CBIZ Inc (CBZ. N). Last week, Prudential Financial Inc (PRU. N), the biggest player in pension transfers, said it had finalized $2.2 billion in pension deals during the fourth quarter, including a $1.8 billion deal with United Technologies Corp (UTX. N). Other large insurers, including Transamerica Life Insurance Co and Principal Financial Group Inc (PFG. N) are also competing for hefty pension deals as smaller insurers jockey for a slice of the market.

With so much competition, many pension consultants expect 2017 to be a strong year for pension deals. Pension transfers totaling $8.1 billion were finalized in the first nine months of 2016, according to the Life Insurance and Market Research Association (LIMRA), an industry trade group. The number of deals hit 225, the highest in more than 25 years."It's really unstoppable now," said Scott McDermott, a managing director at Goldman Sachs Asset Management (GS. N) who advises companies on pension issues. UNDERFUNDED

Pension transfers have been kicking around the insurance industry since the Cleveland Public Library unloaded its pension to Prudential in 1928. Prudential is still making payments to two of those employees, ages 100 and 103, a spokesman said. The biggest driver of the trend in recent years is the growing number of companies that are deciding to end their plans, McDermott said.

As retirees live longer and the legal and financial cost of maintaining pensions rise, corporations are keen to jettison them. The problem for companies looking to offload is that the pension plans must be fully-funded before they can sell them. GM, for example, had to inject more than $2.8 billion into its pension before closing a 2012 transfer to Prudential. It also paid Prudential a $2.1 billion fee for taking on the assets. GM's current U.S. pension plan that is still held by the company is underfunded by $7.2 billion. Surging stock markets and rising interest rates are making it easier for companies to replenish their pension plans but there are still gaps. The average corporate pension fund was 82 percent underfunded as of Jan. 31, according to Mercer Investment Consulting.