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PE-backed brokers led '16 agency M&A; Aetna's Q4'16 operating earnings grow

In the news

Mergers and acquisitions of insurance agencies in the U.S. and Canada in 2016 reached the second highest level of M&A activity on record, according to an OPTIS Partners report. Total deals in 2016 were 449, slightly below the all-time record of 456 in 2015. Private-equity backed brokers turned out to be the biggest buyers of 2016 with 237 purchases, or 53% of the total, the report noted.

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Aetna Inc. reported fourth-quarter 2016 operating earnings of $578 million, or $1.63 per share, up from $482 million, or $1.37 per share, in the prior-year quarter. The company said it continues to weigh its options for responding to the trial court's ruling in the Department of Justice litigation relating to the pending deal for Humana Inc.

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Validus Holdings Ltd. stands to materially increase its U.S. primary specialty lines business with an agreement to acquire the crop risk services business of agricultural processor Archer Daniels Midland Co., notes an S&P Global Market Intelligence report. The $127.5 million acquisition, expected to close in the second quarter, would mark Validus' second purchase in the crop space in the past four years as well as the latest shakeup in a crop insurance business in which some of the largest market participants have experienced ownership changes, highlighted by Zurich's March 2016 purchase of Rural Community.

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Some insurance industry representatives continue to protest revised cybersecurity requirements for financial services companies proposed by New York's top insurance regulator. In addition to concerns that the proposed rule could be overly broad, and worries about confidentiality provisions, insurance industry members are also questioning how cybersecurity rules would be applied on a state-by-state basis.

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House Republicans have released four separate bills of which three are aimed at stabilizing the individual insurance market under the Affordable Care Act while they make efforts to repeal and replace the health law, Modern Healthcare reported. The first bill would prevent insurers from making coverage effective for those who sign up during the ACA's special enrollment periods until the U.S. Department of Health and Human Services verifies the individual's eligibility for such enrollment. The second will increase the age rating band to 5:1 from the current 3:1, meaning insurers can charge older enrollees five times as much as younger enrollees. A third bill, which targets the law's 90-day grace period to catch up on missed premium payments, will either let states establish the grace period or reduce it to one month. The fourth bill provides that if Congress decides to repeal the ACA and restore prior law, the prior law will be replaced with a complete ban on clauses related to preexisting conditions and a promise of guaranteed availability in both the employer and individual market.

All the bills will be considered at a Feb. 2 House Energy and Commerce Committee hearing.

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Progressive Corp. units filed for more than 20 commercial auto rate increases ranging up to as much as 20.7% from Aug. 1, 2016, through Dec. 31, 2016, after having requested only two positive rate changes in that line during the year-earlier period, according to a review of U.S. product filings obtained by S&P Global Market Intelligence.

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Principal Financial Group Inc. reported 2016 fourth-quarter operating earnings of $372.0 million, or $1.27 per share; and Reinsurance Group of America Inc. reported fourth-quarter 2016 operating income of $171.3 million, or $2.63 per share.

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Doug Ommen was appointed Iowa's new insurance commissioner. Ommen had been serving as interim insurance commissioner since Dec. 26, 2016, following the resignation of Nick Gerhart.

And as Horace Mann Educators Corp. CFO Dwayne Hallman has taken a medical leave of absence following a "severe medical incident," Bret Conklin has been named acting CFO, effective Jan. 30.

Featured news

Pfizer, Lilly post Q4'16 profits; pharma heavyweights face diabetes suit: Pfizer and Eli Lilly both reported profits for the fourth quarter of 2016; and diabetes patients filed a class action lawsuit against major drugmakers Sanofi, Novo Nordisk and Eli Lilly for alleged price fixing of insulin treatments.

Financial news in other parts of the world

Europe: More Deutsche fines; UniCredit expects €11.8B loss; pan-EU bad bank push

Middle East & Africa: Bank Audi's 2016 profit rises 17%; African Union admits Morocco

Latin America: Santander Chile's Q4'16 profit jumps almost 30%; Bancamía CEO to retire

The day ahead

Aflac Inc., Chubb Ltd., RenaissanceRe Holdings Ltd. and W. R. Berkley Corp. are expected to report earnings today.

Early morning futures indicators pointed to a lower opening for the U.S. market.

In Asia, the Nikkei 225 dropped 1.69% to 19,041.34.

In Europe, around midday, the FTSE 100 gained 0.53% to 7,156.03, and the Euronext 100 climbed 0.27% to 926.14.

On the macro front

The employment cost index, the Redbook, the S&P Corelogic Case-Shiller HPI report, the Chicago PMI report, the consumer confidence report, the State Street Investor Confidence Index and the Department of Agriculture's farm prices report are due out today.