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10 Hartford Business Journal • June 18, 2018 • www.HartfordBusiness.com By Matt Pilon mpilon@HartfordBusiness.com I n the wake of Congress' $1.5 tril- lion tax cut late last year, public companies across the country have boosted investor perks like stock buybacks and dividends to record levels. But here in Connecticut, the picture so far has been mixed, particularly for the state's largest companies. Aetna, United Technologies Corp., Cigna and The Hartford — all among the largest publicly traded compa- nies in Connecticut — have stalled or indicated they will stall their share buybacks and haven't increased their quarterly divi- dend payments this year. Instead, the four companies are hoarding cash to pay for, or are limited by, major pending acquisi- tions worth a combined $166 billion. Indeed, M&A ac- tivity is providing another avenue for companies to increase share- holder value, and more deals are happening now as firms hold record levels of cash and re- spond to myriad industry and economic pressures. "It's definitely a nice year for M&A," said Howard Silverblatt, a senior index analyst at S&P Dow Jones Indices. "They're all up and the underwriters are very happy." According to FactSet Research Systems, a Norwalk financial data provider that recently raised its own dividend and authorized a new $300 million stock repurchase program, M&A deals in April totaled $275 billion, the highest amount since Oct. 2016. In Connecticut, pending deals include CVS' $69 billion acquisition of Hartford- based Aetna; Bloomfield-based Cigna's $67 billion purchase of Express Scripts; and Farmington-based UTC's $30 billion acquisition of Rockwell Collins. In addition, The Hartford com- pleted its $1.45 billion purchase of Aetna's group life and disability busi- ness late last year. Citing the CVS deal, Aetna's board of directors hasn't authorized any 2018 stock repur- chasing, an about-face for a company that spent billions on buybacks last year. Cigna has told its shareholders not to expect further buybacks before its Express Scripts deal closes, which could be by year-end. Meanwhile, UTC says that it needed to suspend its stock buybacks to "help manage the cash flow and liquidity resulting from the pending [Rockwell] acquisition." Like Cigna, The Hartford has also said it expects no share repurchasing in 2018, choosing instead to use those funds to help pay for its recent Aetna purchase. The Hartford's CEO Christopher Swift said during a recent earnings call that the company aims to make the best use of its available capital to create shareholder value. " … We continue to weigh business opportunities against share repur- chases and other capital management actions," he said. "We will not make hasty decisions, and we do not feel rushed to make long-term impactful choices. Rather, we will be patient and thoughtful regarding these matters." CT companies counter U.S. trends During the first three months of 2018, companies in the S&P 500 spent more than $188 billion repurchasing their own stock, surpassing the previ- ous record of $172 billion set in the third quarter of 2007, Silverblatt said. In Connecticut, however, first-quar- ter buyback spending was down 55 percent compared to a year ago — in stark contrast to a 41 percent increase in the S&P 500 over the same period, according to FactSet, which crunched data for HBJ on 29 of Connecticut's largest public companies. John Butters, FactSet's vice president and senior earnings analyst, said the bulk of Connecticut's decline was due to Aetna's decision to curb its buyback spending by about $3.3 billion in the first quarter compared to a year earlier. The median decline in first-quarter buyback spending for Connecticut companies was 7.4 percent, compared to a median increase across the S&P 500 of 2.9 percent, Butters said. While many companies haven't directly cited the federal tax cuts when announcing new share repurchase pro- grams or dividend hikes, analysts and others say the tax cuts are a key factor. "Record announcements of buy- backs twice in one year and just two months after the tax cut was passed, I think you definitely have to link the two," said Winston Chua, an analyst with TrimTabs Investment Research. While Connecticut companies haven't been overly verbose in explain- ing their capital managment deci- sions, UTC CEO Gregory Hayes made direct reference to the tax cuts in May, when announcing that his company would hire 35,000 workers — includ- ing 9,000 in Connecticut — and invest more than $15 billion in the U.S. in the next five years. Speaking to reporters, Hayes indi- cated that the tax cuts were playing a role in UTC's investment. The U.S. "now has the most competi- tive tax system in the world,'' Hayes said. Aetna CEO Mark Bertolini hasn't Capital Management Amid record U.S. stock buybacks, CT corporates keep focus on M&A Aetna leads CT's stock buyback dip Connecticut's top Fortune 500 companies have curtailed, or intend to curb, their share repurchases this year, countering a national buyback boom spurred in part by federal tax cuts. (In millions) 1Q 2017 Repurchases 1Q 2018 Repurchases $ Change % Change Aetna $3,403 $72 $(3,331) (97.9%) United Technologies Corp. $933 $25 $(908) (97.3%) Cigna Corp.* $239 $310 $71 29.7% Charter Communications $895 $617 $(278) (31.1%) Hartford Financial Services Group $351 $0 $(351) 100% * Cigna froze repurchasing in May. Source: FactSet Research Systems Howard Silverblatt, Senior Index Analyst, S&P Dow Jones Indices PHOTO | STUART ISETT/FORTUNE, FLICKR CREATIVE COMMONS Aetna CEO Mark Bertolini speaks at the Fortune Brainstorm Health conference in March. In the midst of a massive $69 billion deal with CVS, Aetna has curtailed stock repurchasing, which fits into a Connecticut trend, but runs counter to a national boom in the wake of federal tax cuts.