Snow covers the ground around Cigna Corp. signage displayed at the company's headquarters in ... [+]
Cigna will sell its group life and disability insurance unit to New York Life Insurance for $6.3 billion in a move to focus on its healthcare businesses.
In announcing the sale Wednesday morning after much speculation such a deal was in the works, the health insurer said “the transaction allows Cigna to increase focus on core growth platforms.”
Cigna said some of the sale proceeds will be used to increase its share repurchase authority “by $3 billion to an aggregate amount of $4 billion.” Cigna will also use proceeds to pay down debt accumulated from its $67 billion acquisition of the pharmacy benefit manager Express Scripts a year ago.
Cigna’s move is similar to what Aetna did two years ago in agreeing to sell its life and disability business to The Hartford Group for $1.45 billion in cash. New York Life said the deal offered an opportunity to add ‘millions’ of new policyholders. Cigna’s “group life and disability insurance business will operate within New York Life’s portfolio of strategic businesses,” the companies said. “This transaction increases the value we can deliver to our policy owners, strengthens our well-defined business model, and adds millions of customers to the New York Life family,” New York Life chairman and chief executive Ted Mathas said.
Meanwhile, Cigna is focusing on its health offerings to consumers, employers and those insured by Medicaid and Medicare. Cigna is in a race with rival health insurance companies like UnitedHealth Group, Anthem, Humana and CVS Health’s Aetna health insurance business to grow its business administering health benefits for seniors as more flock to Medicare Advantage plans.
For its battles ahead, Cigna is going to need cash if it plans on following its rivals into the business of providing healthcare services. Cigna chief executive David Cordani has said Cigna is focused on “whole person health” and he has been working to integrate the company’s medical insurance, pharmacy benefits and mental health coverage into a more seamless operation for consumers and patients.
Cigna is also aggressively moving doctors and hospitals away from fee-for-service payment to value-based reimbursement models that provide care for populations of patients. Cigna’s value-based care push requires a lot of capital to invest in provider networks, information technology and related systems.
